[Congressional Bills 109th Congress]
[From the U.S. Government Publishing Office]
[H.R. 3263 Introduced in House (IH)]







109th CONGRESS
  1st Session
                                H. R. 3263

 To reduce the growth of energy use in the United States, to limit the 
impact of growing energy use on the economy, environment, and national 
security of the United States through reductions in energy demand, and 
                          for other purposes.


_______________________________________________________________________


                    IN THE HOUSE OF REPRESENTATIVES

                             July 13, 2005

Mr. Wamp (for himself, Mr. Hall, Mr. Udall of Colorado, Mr. Markey, Mr. 
Allen, Mr. Gonzalez, Mr. Gordon, Mr. Castle, Mr. Ehlers, Mr. Boehlert, 
and Mr. Gilchrest) introduced the following bill; which was referred to 
the Committee on Energy and Commerce, and in addition to the Committees 
     on Ways and Means and Financial Services, for a period to be 
subsequently determined by the Speaker, in each case for consideration 
  of such provisions as fall within the jurisdiction of the committee 
                               concerned

_______________________________________________________________________

                                 A BILL


 
 To reduce the growth of energy use in the United States, to limit the 
impact of growing energy use on the economy, environment, and national 
security of the United States through reductions in energy demand, 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; TABLE OF CONTENTS.

    (a) Short Title.--This Act may be cited as the ``Energy Efficiency 
Cornerstone Act of 2005''.
    (b) Table of Contents.--The table of contents of this Act is as 
follows:

Sec. 1. Short title; table of contents.
Sec. 2. Findings and purposes.
Sec. 3. Definition of Secretary.
             TITLE I--RESIDENTIAL AND COMMERCIAL BUILDINGS

             Subtitle A--Appliance and Equipment Standards

Sec. 101. Energy conservation standards for additional products.
Sec. 102. Energy conservation standards for commercial equipment.
Sec. 103. Energy labeling.
Sec. 104. Equipment standards and analysis program.
                   Subtitle B--Building Energy Codes

Sec. 111. State building energy efficiency codes incentives.
Sec. 112. Energy code applicable to manufactured housing.
Sec. 113. Energy efficiency standards.
                        Subtitle C--Energy Star

Sec. 121. Energy Star Program.
                     Subtitle D--Federal Buildings

Sec. 131. Federal building performance standards.
                        TITLE II--TRANSPORTATION

Sec. 201. Alternative compliance with fleet rules.
Sec. 202. Standards for Executive agency automobiles.
                          TITLE III--INDUSTRY

Sec. 301. Voluntary commitments to reduce industrial energy intensity.
     TITLE IV--ELECTRICITY AND NATURAL GAS UTILITIES AND SUPPLIERS

Sec. 401. Energy efficient electric and natural gas utilities study.
Sec. 402. Energy efficiency pilot program.
Sec. 403. Energy efficiency resource programs.
                        TITLE V--TAX INCENTIVES

Sec. 500. Amendment of 1986 Code.
             Subtitle A--Buildings and Equipment Incentives

Sec. 501. Credit for construction of new energy efficient homes.
Sec. 502. Credit for energy efficiency improvements to existing homes.
Sec. 503. Energy efficient commercial buildings deduction.
Sec. 504. Credit for residential energy efficient property.
Sec. 505. Credit for energy efficient appliances.
Sec. 506. Incentive for certain energy efficient property used in 
                            business.
Sec. 507. Credit for business installation of qualified fuel cells.
Sec. 508. Credit for nonbusiness installation of qualified fuel cells 
                            [new addition not updated].
Sec. 509. New nonrefundable personal credits allowed against regular 
                            and minimum taxes.
Sec. 510. Certain business energy credits allowed against regular and 
                            minimum taxes.
                 Subtitle B--Transportation Incentives

Sec. 511. Alternative motor vehicle credit.
                    Subtitle C--Industry Incentives

Sec. 521. Energy credit for combined heat and power system property.

SEC. 2. FINDINGS AND PURPOSES.

    (a) Findings.--Congress finds that--
            (1)(A) energy prices, especially the price of petroleum and 
        natural gas, have soared over the last few years due to demand 
        exceeding supply; and
            (B) as both supply and demand are relatively inflexible, 
        even small reductions in United States demand for natural gas 
        and oil can result in significant reductions in gas and oil 
        prices;
            (2) energy consumption in the United States is projected by 
        the Energy Information Administration to increase by 
        35,000,000,000,000,000 Btus over the next 2 decades, which is 
        equivalent to twice the energy consumed by all the cars 
        currently on the roads;
            (3)(A) by 2025, the Energy Information Administration 
        projects that 80 percent of oil used in the United States will 
        be imported; and
            (B) overall energy imports are expected to increase by 75 
        percent in the United States;
            (4) energy efficiency improvements since the 1970s have 
        reduced current United States energy consumption by 40 percent, 
        or 40,000,000,000,000,000 Btus, making energy efficiency the 
        greatest energy resource of the United States;
            (5) the United States has not nearly tapped the energy 
        efficiency resource of the United States in that energy 
        consumption could be reduced by 20 to 50 percent through cost-
        effective improvements in the homes, buildings, cars, industry, 
        and utilities of the United States; and
            (6) energy efficiency is generally the quickest, cheapest, 
        and cleanest way--
                    (A) to bring energy supply and demand in balance; 
                and
                    (B) to reduce the economic, environmental, and 
                energy security impacts associated with energy use.
    (b) Purposes.--The purposes of this Act are--
            (1) to reduce the growth of energy use in the United States 
        significantly, with cumulative energy savings through 2025 of 
        50,000,000,000,000,000 to 80,000,000,000,000,000 Btus; and
            (2) to limit the impacts of growing energy use on the 
        economy, environment, and national security of the United 
        States through reductions in energy demand.

SEC. 3. DEFINITION OF SECRETARY.

    In this Act, the term ``Secretary'' means the Secretary of Energy.

             TITLE I--RESIDENTIAL AND COMMERCIAL BUILDINGS

             Subtitle A--Appliance and Equipment Standards

SEC. 101. ENERGY CONSERVATION STANDARDS FOR ADDITIONAL PRODUCTS.

    (a) Definitions.--Section 321 of the Energy Policy and Conservation 
Act (42 U.S.C. 6291) is amended--
            (1) in paragraph (29)--
                    (A) in subparagraph (D)--
                            (i) in clause (i), by striking ``C78.1-
                        1978(R1984)'' and inserting ``C78.81-2003 (Data 
                        Sheet 7881-ANSI-1010-1)'';
                            (ii) in clause (ii), by striking ``C78.1-
                        1978(R1984)'' and inserting ``C78.81-2003 (Data 
                        Sheet 7881-ANSI-3007-1)''; and
                            (iii) in clause (iii), by striking ``C78.1-
                        1978(R1984)'' and inserting ``C78.81-2003 (Data 
                        Sheet 7881-ANSI-1019-1)''; and
                    (B) by adding at the end the following:
            ``(M) The term `F34T12 lamp' (also known as a `F40T12/ES 
        lamp') means a nominal 34 watt tubular fluorescent lamp that is 
        48 inches in length and 1\1/2\ inches in diameter, and conforms 
        to ANSI standard C78.81-2003 (Data Sheet 7881-ANSI-1006-1).
            ``(N) The term `F96T12/ES lamp' means a nominal 60 watt 
        tubular fluorescent lamp that is 96 inches in length and 1\1/2\ 
        inches in diameter, and conforms to ANSI standard C78.81-2003 
        (Data Sheet 7881-ANSI-3006-1).
            ``(O) The term `F96T12HO/ES lamp' means a nominal 95 watt 
        tubular fluorescent lamp that is 96 inches in length and 1\1/2\ 
        inches in diameter, and conforms to ANSI standard C78.81-2003 
        (Data Sheet 7881-ANSI-1017-1).
            ``(P) The term `replacement ballast' means a ballast that--
                    ``(i) is designed for use to replace an existing 
                ballast in a previously installed luminaire;
                    ``(ii) is marked `FOR REPLACEMENT USE ONLY';
                    ``(iii) is shipped by the manufacturer in packages 
                containing not more than 10 ballasts; and
                    ``(iv) has output leads that when fully extended 
                are a total length that is less than the length of the 
                lamp with which the ballast is intended to be 
                operated.'';
            (2) in paragraph (30)(S)--
                    (A) by inserting ``(i)'' before ``The term''; and
                    (B) by adding at the end the following:
                    ``(ii) The term `medium base compact fluorescent 
                lamp' does not include--
                            ``(I) any lamp that is--
                                    ``(aa) specifically designed to be 
                                used for special purpose applications; 
                                and
                                    ``(bb) unlikely to be used in 
                                general purpose applications, such as 
                                the applications described in 
                                subparagraph (D); or
                            ``(II) any lamp not described in 
                        subparagraph (D) that is excluded by the 
                        Secretary, by rule, because the lamp is--
                                    ``(aa) designed for special 
                                applications; and
                                    ``(bb) unlikely to be used in 
                                general purpose applications.''; and
            (3) by adding at the end the following:
            ``(32) The term `battery charger' means a device that 
        charges batteries for consumer products, including battery 
        chargers embedded in other consumer products.
            ``(33)(A) The term `commercial prerinse spray valve' means 
        a handheld device designed and marketed for use with commercial 
        dishwashing and ware washing equipment that sprays water on 
        dishes, flatware, and other food service items for the purpose 
        of removing food residue before cleaning the items.
            ``(B) The Secretary may modify the definition of 
        `commercial prerinse spray valve' by rule--
                            ``(i) to include products--
                                    ``(I) that are extensively used in 
                                conjunction with commercial dishwashing 
                                and ware washing equipment;
                                    ``(II) the application of standards 
                                to which would result in significant 
                                energy savings; and
                                    ``(III) the application of 
                                standards to which would meet the 
                                criteria specified in section 
                                325(o)(4); and
                            ``(ii) to exclude products--
                                    ``(I) that are used for special 
                                food service applications;
                                    ``(II) that are unlikely to be 
                                widely used in conjunction with 
                                commercial dishwashing and ware washing 
                                equipment; and
                                    ``(III) the application of 
                                standards to which would not result in 
                                significant energy savings.
            ``(34) The term `dehumidifier' means a self-contained, 
        electrically operated, and mechanically encased assembly 
        consisting of--
                    ``(A) a refrigerated surface (evaporator) that 
                condenses moisture from the atmosphere;
                    ``(B) a refrigerating system, including an electric 
                motor;
                    ``(C) an air-circulating fan; and
                    ``(D) means for collecting or disposing of the 
                condensate.
            ``(35)(A) The term `distribution transformer' means a 
        transformer that--
                    ``(i) has an input voltage of 34.5 kilovolts or 
                less;
                    ``(ii) has an output voltage of 600 volts or less; 
                and
                    ``(iii) is rated for operation at a frequency of 60 
                Hertz.
            ``(B) The term `distribution transformer' does not 
        include--
                            ``(i) a transformer with multiple voltage 
                        taps, the highest of which equals at least 20 
                        percent more than the lowest;
                            ``(ii) a transformer that is designed to be 
                        used in a special purpose application and is 
                        unlikely to be used in general purpose 
                        applications, such as a drive transformer, 
                        rectifier transformer, auto-transformer, 
                        Uninterruptible Power System transformer, 
                        impedance transformer, regulating transformer, 
                        sealed and nonventilating transformer, machine 
                        tool transformer, welding transformer, 
                        grounding transformer, or testing transformer; 
                        or
                            ``(iii) any transformer not listed in 
                        clause (ii) that is excluded by the Secretary 
                        by rule because--
                                    ``(I) the transformer is designed 
                                for a special application;
                                    ``(II) the transformer is unlikely 
                                to be used in general purpose 
                                applications; and
                                    ``(III) the application of 
                                standards to the transformer would not 
                                result in significant energy savings.
            ``(36) The term `external power supply' means an external 
        power supply circuit that is used to convert household electric 
        current into DC current or lower-voltage AC current to operate 
        a consumer product.
            ``(37) The term `illuminated exit sign' means a sign that--
                    ``(A) is designed to be permanently fixed in place 
                to identify an exit; and
                    ``(B) consists of an electrically powered integral 
                light source that--
                            ``(i) illuminates the legend `EXIT' and any 
                        directional indicators; and
                            ``(ii) provides contrast between the 
                        legend, any directional indicators, and the 
                        background.
            ``(38) The term `low-voltage dry-type distribution 
        transformer' means a distribution transformer that--
                    ``(A) has an input voltage of 600 volts or less;
                    ``(B) is air-cooled; and
                    ``(C) does not use oil as a coolant.
            ``(39) The term `pedestrian module' means a light signal 
        used to convey movement information to pedestrians.
            ``(40) The term `refrigerated bottled or canned beverage 
        vending machine' means a commercial refrigerator that cools 
        bottled or canned beverages and dispenses the bottled or canned 
        beverages on payment.
            ``(41) The term `standby mode' means the lowest power 
        consumption mode, as established on an individual product basis 
        by the Secretary, that--
                    ``(A) cannot be switched off or influenced by the 
                user; and
                    ``(B) may persist for an indefinite time when an 
                appliance is--
                            ``(i) connected to the main electricity 
                        supply; and
                            ``(ii) used in accordance with the 
                        instructions of the manufacturer.
            ``(42) The term `torchiere' means a portable electric lamp 
        with a reflector bowl that directs light upward to give 
        indirect illumination.
            ``(43) The term `traffic signal module' means a standard 8-
        inch (200mm) or 12-inch (300mm) traffic signal indication 
        that--
                    ``(A) consists of a light source, a lens, and all 
                other parts necessary for operation; and
                    ``(B) communicates movement messages to drivers 
                through red, amber, and green colors.
            ``(44) The term `transformer' means a device consisting of 
        2 or more coils of insulated wire that transfers alternating 
        current by electromagnetic induction from 1 coil to another to 
        change the original voltage or current value.
            ``(45)(A) The term `unit heater' means a self-contained 
        fan-type heater designed to be installed within the heated 
        space.
            ``(B) The term `unit heater' does not include a warm air 
        furnace.
            ``(46)(A) The term `high intensity discharge lamp' means an 
        electric-discharge lamp in which--
                    ``(i) the light-producing arc is stabilized by bulb 
                wall temperature; and
                    ``(ii) the arc tube has a bulb wall loading in 
                excess of 3 Watts/cm<SUP>2</SUP>.
            ``(B) The term `high intensity discharge lamp' includes 
        mercury vapor, metal halide, and high-pressure sodium lamps 
        described in subparagraph (A).
            ``(47)(A) The term `mercury vapor lamp' means a high 
        intensity discharge lamp in which the major portion of the 
        light is produced by radiation from mercury operating at a 
        partial pressure in excess of 100,000 Pa (approximately 1 atm).
            ``(B) The term `mercury vapor lamp' includes clear, 
        phosphor-coated, and self-ballasted lamps described in 
        subparagraph (A).
            ``(48) The term `mercury vapor lamp ballast' means a device 
        that is designed and marketed to start and operate mercury 
        vapor lamps by providing the necessary voltage and current.''.
    (b) Test Procedures.--Section 323 of the Energy Policy and 
Conservation Act (42 U.S.C. 6293) is amended--
            (1) in subsection (b), by adding at the end the following:
    ``(9) Test procedures for illuminated exit signs shall be based on 
the test method used under version 2.0 of the Energy Star program of 
the Environmental Protection Agency for illuminated exit signs.
    ``(10)(A) Test procedures for distribution transformers and low 
voltage dry-type distribution transformers shall be based on the 
`Standard Test Method for Measuring the Energy Consumption of 
Distribution Transformers' prescribed by the National Electrical 
Manufacturers Association (NEMA TP 2-1998).
    ``(B) The Secretary may review and revise the test procedures 
established under subparagraph (A).
    ``(C) For purposes of section 346(a), the test procedures 
established under subparagraph (A) shall be considered to be the 
testing requirements prescribed by the Secretary under section 
346(a)(1) for distribution transformers for which the Secretary makes a 
determination that energy conservation standards would--
            ``(i) be technologically feasible and economically 
        justified; and
            ``(ii) result in significant energy savings.
    ``(11) Test procedures for traffic signal modules and pedestrian 
modules shall be based on the test method used under the Energy Star 
program of the Environmental Protection Agency for traffic signal 
modules, as in effect on the date of enactment of this paragraph.
    ``(12)(A) Test procedures for medium base compact fluorescent lamps 
shall be based on the test methods for compact fluorescent lamps used 
under the August 9, 2001, version of the Energy Star program of the 
Environmental Protection Agency and the Department of Energy.
    ``(B) Except as provided in subparagraph (C), medium base compact 
fluorescent lamps shall meet all test requirements for regulated 
parameters of section 325(cc).
    ``(C) Notwithstanding subparagraph (B), if manufacturers document 
engineering predictions and analysis that support expected attainment 
of lumen maintenance at 40 percent rated life and lamp lifetime, medium 
base compact fluorescent lamps may be marketed before completion of the 
testing of lamp life and lumen maintenance at 40 percent of rated life.
    ``(13) Test procedures for dehumidifiers shall be based on the test 
criteria used under the Energy Star Program Requirements for 
Dehumidifiers developed by the Environmental Protection Agency, as in 
effect on the date of enactment of this paragraph unless revised by the 
Secretary pursuant to this section.
    ``(14) The test procedure for measuring flow rate for commercial 
prerinse spray valves shall be based on American Society for Testing 
and Materials Standard F2324, entitled `Standard Test Method for Pre-
Rinse Spray Valves.'
    ``(15) The test procedure for refrigerated bottled or canned 
beverage vending machines shall be based on American National Standards 
Institute/American Society of Heating, Refrigerating and Air-
Conditioning Engineers Standard 32.1-2004, entitled `Methods of Testing 
for Rating Vending Machines for Bottled, Canned or Other Sealed 
Beverages'.''; and
            (2) by adding at the end the following:
    ``(f) Additional Consumer and Commercial Products.--(1) Not later 
than 2 years after the date of enactment of this subsection, the 
Secretary shall prescribe testing requirements for--
            ``(A) suspended ceiling fans; and
            ``(B) refrigerated bottled or canned beverage vending 
        machines.
    ``(2) To the maximum extent practicable, the testing requirements 
prescribed under paragraph (1) shall be based on existing test 
procedures used in industry.''.
    (c) Standard Setting Authority.--Section 325 of the Energy Policy 
and Conservation Act (42 U.S.C. 6295) is amended--
            (1) in subsection (f)(3), by adding at the end the 
        following:
    ``(D) Notwithstanding any other provision of this Act, if the 
requirements of subsection (o) are met, the Secretary may consider and 
prescribe energy conservation standards or energy use standards for 
electricity used for purposes of circulating air through duct work.'';
            (2) in subsection (g)--
                    (A) in paragraph (6)(B), by inserting ``and 
                labeled'' after ``designed''; and
                    (B) by adding at the end the following:
    ``(8)(A) Each fluorescent lamp ballast (other than replacement 
ballasts or ballasts described in subparagraph (C))--
            ``(i)(I) manufactured on or after July 1, 2009;
            ``(II) sold by the manufacturer on or after October 1, 
        2009; or
            ``(III) incorporated into a luminaire by a luminaire 
        manufacturer on or after July 1, 2010; and
            ``(ii) designed--
                    ``(I) to operate at nominal input voltages of 120 
                or 277 volts;
                    ``(II) to operate with an input current frequency 
                of 60 Hertz; and
                    ``(III) for use in connection with F34T12 lamps, 
                F96T12/ES lamps, or F96T12HO/ES lamps;
        shall have a power factor of 0.90 or greater and shall have a 
        ballast efficacy factor of not less than the following:
    ``(B) The standards described in subparagraph (A) shall apply to 
all ballasts covered by subparagraph (A)(ii) that are manufactured on 
or after July 1, 2010, or sold by the manufacturer on or after October 
1, 2010.


------------------------------------------------------------------------
 ``Application for operation for                              Ballast
    operation of ballast input         Total nominal        efficienty
             voltage                     lampwatts            factor
------------------------------------------------------------------------
One F34T12 lamp..................  120/277..............              34
Two F34T12 lamps.................  120/277..............              68
Two F96 T12/ES lamps.............  120/277..............             120
Two F96 T12HO/ES lamps...........  120/277..............             190
------------------------------------------------------------------------

    ``(C) The standards described in subparagraphs (A) and (B) do not 
apply to--
            ``(i) a ballast that is designed for dimming to 50 percent 
        or less of the maximum output of the ballast;
            ``(ii) a ballast that is designed for use with 2 F96T12HO 
        lamps at ambient temperatures of 20 deg.F or less and for use 
        in an outdoor sign; or
            ``(iii) a ballast that has a power factor of less than 0.90 
        and is designed and labeled for use only in residential 
        applications.'';
            (3) in subsection (o), by adding at the end the following:
            ``(5)(A) Notwithstanding any other provision in this 
        section, the Secretary may set 2 standards for space heating 
        and air conditioning equipment by dividing the United States 
        into 2 climate zones to achieve the maximum level of energy 
        savings that are technically feasible and economically 
        justified.
            ``(B) The climate zone boundaries described in subparagraph 
        (A)--
                    ``(i) shall follow State borders; and
                    ``(ii) shall include only contiguous States.
            ``(C) In determining whether to set 2 standards as 
        described in subparagraph (A), the Secretary shall consider all 
        factors described in paragraphs (1) through (4).
            ``(D) If the Secretary sets 2 standards as described in 
        subparagraph (A), it shall be illegal to transport noncomplying 
        products into a State for retail sale or installation in that 
        State.''.
            (4) by adding at the end the following:
    ``(u) Battery Charger and External Power Supply Electric Energy 
Consumption.--(1)(A) Not later than 18 months after the date of 
enactment of this subsection, the Secretary shall, after providing 
notice and an opportunity for comment, prescribe, by rule, definitions 
and test procedures for the power use of battery chargers and external 
power supplies.
    ``(B) In establishing the test procedures under subparagraph (A), 
the Secretary shall--
            ``(i) consider existing definitions and test procedures 
        used for measuring energy consumption in standby mode and other 
        modes; and
            ``(ii) assess the current and projected future market for 
        battery chargers and external power supplies.
    ``(C) The assessment under subparagraph (B)(ii) shall include--
            ``(i) estimates of the significance of potential energy 
        savings from technical improvements to battery chargers and 
        external power supplies; and
            ``(ii) suggested product classes for energy conservation 
        standards.
    ``(D) Not later than 18 months after the date of enactment of this 
subsection, the Secretary shall hold a scoping workshop to discuss and 
receive comments on plans for developing energy conservation standards 
for energy use for battery chargers and external power supplies.
    ``(E)(i) Not later than 3 years after the date of enactment of this 
subsection, the Secretary shall issue a final rule that determines 
whether energy conservation standards shall be issued for battery 
chargers and external power supplies or classes of battery chargers and 
external power supplies.
    ``(ii) For each product class, any energy conservation standards 
issued under clause (i) shall be set at the lowest level of energy use 
that--
            ``(I) meets the criteria and procedures of subsections (o), 
        (p), (q), (r), (s), and (t); and
            ``(II) would result in significant overall annual energy 
        savings, considering standby mode and other operating modes.
    ``(2) In determining under section 323 whether test procedures and 
energy conservation standards under this section should be revised with 
respect to covered products that are major sources of standby mode 
energy consumption, the Secretary shall consider whether to incorporate 
standby mode into the test procedures and energy conservation 
standards, taking into account standby mode power consumption compared 
to overall product energy consumption.
    ``(3) The Secretary shall not propose an energy conservation 
standard under this section, unless the Secretary has issued applicable 
test procedures for each product under section 323.
    ``(4) Any energy conservation standard issued under this subsection 
shall be applicable to products manufactured or imported beginning on 
the date that is 3 years after the date of issuance.
    ``(5) The Secretary and the Administrator shall collaborate and 
develop programs (including programs under section 324A and other 
voluntary industry agreements or codes of conduct) that are designed to 
reduce standby mode energy use.
    ``(v) Suspended Ceiling Fans and Refrigerated Beverage Vending 
Machines.--(1) Not later than 4 years after the date of enactment of 
this subsection, the Secretary shall prescribe, by rule, energy 
conservation standards for--
            ``(A) suspended ceiling fans; and
            ``(B) refrigerated bottled or canned beverage vending 
        machines.
    ``(2) In establishing energy conservation standards under this 
subsection, the Secretary shall use the criteria and procedures 
prescribed under subsections (o) and (p).
    ``(3) Any energy conservation standard prescribed under this 
subsection shall apply to products manufactured 3 years after the date 
of publication of a final rule establishing the energy conservation 
standard.
    ``(w) Illuminated Exit Signs.--An illuminated exit sign 
manufactured on or after January 1, 2006, shall meet the version 2.0 
Energy Star Program performance requirements for illuminated exit signs 
prescribed by the Environmental Protection Agency.
    ``(x) Torchieres.--A torchiere manufactured on or after January 1, 
2006--
            ``(1) shall consume not more than 190 watts of power; and
            ``(2) shall not be capable of operating with lamps that 
        total more than 190 watts.
    ``(y) Low Voltage Dry-Type Distribution Transformers.--The 
efficiency of a low voltage dry-type distribution transformer 
manufactured on or after January 1, 2007, shall be the Class I 
Efficiency Levels for distribution transformers specified in table 4-2 
of the `Guide for Determining Energy Efficiency for Distribution 
Transformers' published by the National Electrical Manufacturers 
Association (NEMA TP-1-2002).
    ``(z) Traffic Signal Modules and Pedestrian Modules.--Any traffic 
signal module or pedestrian module manufactured on or after January 1, 
2006, shall--
            ``(1) meet the performance requirements used under the 
        Energy Star program of the Environmental Protection Agency for 
        traffic signals, as in effect on the date of enactment of this 
        subsection; and
            ``(2) be installed with compatible, electrically connected 
        signal control interface devices and conflict monitoring 
        systems.
    ``(aa) Unit Heaters.--A unit heater manufactured on or after the 
date that is 3 years after the date of enactment of this subsection 
shall--
            ``(1) be equipped with an intermittent ignition device; and
            ``(2) have power venting or an automatic flue damper.
    ``(bb) Medium Base Compact Fluorescent Lamps.--(1) A bare lamp and 
covered lamp (no reflector) medium base compact fluorescent lamp 
manufactured on or after January 1, 2006, shall meet the following 
requirements prescribed by the August 9, 2001, version of the Energy 
Star Program Requirements for Compact Fluorescent Lamps, Energy Star 
Eligibility Criteria, Energy-Efficiency Specification issued by the 
Environmental Protection Agency and Department of Energy:
            ``(A) Minimum initial efficacy.
            ``(B) Lumen maintenance at 1000 hours.
            ``(C) Lumen maintenance at 40 percent of rated life.
            ``(D) Rapid cycle stress test.
            ``(E) Lamp life.
    ``(2) The Secretary may, by rule, establish requirements for color 
quality (CRI), power factor, operating frequency, and maximum allowable 
start time based on the requirements prescribed by the August 9, 2001, 
version of the Energy Star Program Requirements for Compact Fluorescent 
Lamps.
    ``(3) The Secretary may, by rule--
            ``(A) revise the requirements established under paragraph 
        (2); or
            ``(B) establish other requirements, after considering 
        energy savings, cost effectiveness, and consumer satisfaction.
    ``(cc) Dehumidifiers.--(1) Dehumidifiers manufactured on or after 
October 1, 2007, shall have an Energy Factor that meets or exceeds the 
following values:

                                                  Minimum Energy Factor
``Product Capacity (pints/day):                           (Liters/kWh):
    25.00 or less.................................                1.00 
    25.01 - 35.00.................................                1.20 
    35.01 - 54.00.................................                1.30 
    54.01 - 74.99.................................                1.50 
    75.00 or more.................................                2.25.
    ``(2)(A) Not later than October 1, 2009, the Secretary shall 
publish a final rule in accordance with subsections (o) and (p), to 
determine whether the energy conservation standards established under 
paragraph (1) should be amended.
    ``(B) The final rule published under subparagraph (A) shall--
            ``(i) contain any amendment by the Secretary; and
            ``(ii) provide that the amendment applies to products 
        manufactured on or after October 1, 2012.
    ``(C) If the Secretary does not publish an amendment that takes 
effect by October 1, 2012, dehumidifiers manufactured on or after 
October 1, 2012, shall have an Energy Factor that meets or exceeds the 
following values:

                                                  Minimum Energy Factor
``Product Capacity (pints/day):                           (Liters/kWh):
    25.00 or less.................................                1.20 
    25.01 - 35.00.................................                1.30 
    35.01 - 45.00.................................                1.40 
    45.01 - 54.00.................................                1.50 
    54.01 - 74.99.................................                1.60 
    75.00 or more.................................                 2.5.
    ``(dd) Commercial Prerinse Spray Valves.--Commercial prerinse spray 
valves manufactured on or after January 1, 2006, shall have a flow rate 
of not more than 1.6 gallons per minute.
    ``(ee) Mercury Vapor Lamp Ballasts.--Mercury vapor lamp ballasts 
shall not be manufactured or imported after January 1, 2008.
    ``(ff) Application Date.--Section 327 applies--
            ``(1) to products for which energy conservation standards 
        are to be established under subsection (l), (u), or (v) 
        beginning on the date on which a final rule is issued by the 
        Secretary, except that any State or local standard prescribed 
        or enacted for the product before the date on which the final 
        rule is issued shall not be preempted until the energy 
        conservation standard established under subsection (l),(u), or 
        (v) for the product takes effect; and
            ``(2) to products for which energy conservation standards 
        are established under subsections (w) through (ee) on the date 
        of enactment of those subsections, except that any State or 
        local standard prescribed or enacted before the date of 
        enactment of those subsections shall not be preempted until the 
        energy conservation standards established under subsections (w) 
        through (ee) take effect.''.
    (d) General Rule of Preemption.--Section 327(c) of the Energy 
Policy and Conservation Act (42 U.S.C. 6297(c)) is amended--
            (1) in paragraph (5), by striking ``or'' at the end;
            (2) in paragraph (6), by striking the period at the end and 
        inserting ``; or''; and
            (3) by adding at the end the following:
            ``(7)(A) is a regulation concerning standards for 
        commercial prerinse spray valves adopted by the California 
        Energy Commission before January 1, 2005; or
            ``(B) is an amendment to a regulation described in 
        subparagraph (A) that was developed to align California 
        regulations with changes in American Society for Testing and 
        Materials Standard F2324;
            ``(8)(A) is a regulation concerning standards for 
        pedestrian modules adopted by the California Energy Commission 
        before January 1, 2005; or
            ``(B) is an amendment to a regulation described in 
        subparagraph (A) that was developed to align California 
        regulations to changes in the Institute for Transportation 
        Engineers standards, entitled `Performance Specification: 
        Pedestrian Traffic Control Signal Indications'.''.

SEC. 102. ENERGY CONSERVATION STANDARDS FOR COMMERCIAL EQUIPMENT.

    (a) Definitions.--Section 340 of the Energy Policy and Conservation 
Act (42 U.S.C. 6311) is amended--
            (1) in paragraph (1)--
                    (A) by redesignating subparagraphs (D) through (G) 
                as subparagraphs (H) through (K), respectively; and
                    (B) by inserting after subparagraph (C) the 
                following:
                    ``(D) Very large commercial package air 
                conditioning and heating equipment.
                    ``(E) Commercial refrigerators, freezers, and 
                refrigerator-freezers.
                    ``(F) Automatic commercial ice makers.
                    ``(G) Commercial clothes washers.'';
            (2) in paragraph (2)(B), by striking ``small and large 
        commercial package air conditioning and heating equipment'' and 
        inserting ``commercial package air conditioning and heating 
        equipment, commercial refrigerators, freezers, and 
        refrigerator-freezers, automatic commercial ice makers, 
        commercial clothes washers'';
            (3) by striking paragraphs (8) and (9) and inserting the 
        following:
            ``(8)(A) The term `commercial package air conditioning and 
        heating equipment' means air-cooled, water-cooled, 
        evaporatively-cooled, or water source (not including ground 
        water source) electrically operated, unitary central air 
        conditioners and central air conditioning heat pumps for 
        commercial application.
            ``(B) The term `small commercial package air conditioning 
        and heating equipment' means commercial package air 
        conditioning and heating equipment that is rated below 135,000 
        Btu per hour (cooling capacity).
            ``(C) The term `large commercial package air conditioning 
        and heating equipment' means commercial package air 
        conditioning and heating equipment that is rated--
                    ``(i) at or above 135,000 Btu per hour; and
                    ``(ii) below 240,000 Btu per hour (cooling 
                capacity).
            ``(D) The term `very large commercial package air 
        conditioning and heating equipment' means commercial package 
        air conditioning and heating equipment that is rated--
                    ``(i) at or above 240,000 Btu per hour; and
                    ``(ii) below 760,000 Btu per hour (cooling 
                capacity).
            ``(9)(A) The term `commercial refrigerator, freezer, and 
        refrigerator-freezer' means refrigeration equipment that--
                    ``(i) is not a consumer product (as defined in 
                section 321);
                    ``(ii) is not designed and marketed exclusively for 
                medical, scientific, or research purposes;
                    ``(iii) operates at a chilled, frozen, combination 
                chilled and frozen, or variable temperature;
                    ``(iv) displays or stores merchandise and other 
                perishable materials horizontally, semivertically, or 
                vertically;
                    ``(v) has transparent or solid doors, sliding or 
                hinged doors, a combination of hinged, sliding, 
                transparent, or solid doors, or no doors;
                    ``(vi) is designed for pull-down temperature 
                applications or holding temperature applications; and
                    ``(vii) is connected to a self-contained condensing 
                unit or to a remote condensing unit.
            ``(B) The term `holding temperature application' means a 
        use of commercial refrigeration equipment other than a pull-
        down temperature application, except a blast chiller or 
        freezer.
            ``(C) The term `integrated average temperature' means the 
        average temperature of all test package measurements taken 
        during the test.
            ``(D) The term `pull-down temperature application' means a 
        commercial refrigerator with doors that, when fully loaded with 
        12 ounce beverage cans at 90 degrees F, can cool those 
        beverages to an average stable temperature of 38 degrees F in 
        12 hours or less.
            ``(E) The term `remote condensing unit' means a factory-
        made assembly of refrigerating components designed to compress 
        and liquefy a specific refrigerant that is remotely located 
        from the refrigerated equipment and consists of 1 or more 
        refrigerant compressors, refrigerant condensers, condenser fans 
        and motors, and factory supplied accessories.
            ``(F) The term `self-contained condensing unit' means a 
        factory-made assembly of refrigerating components designed to 
        compress and liquefy a specific refrigerant that is an integral 
        part of the refrigerated equipment and consists of 1 or more 
        refrigerant compressors, refrigerant condensers, condenser fans 
        and motors, and factory supplied accessories.''; and
            (4) by adding at the end the following:
            ``(19) The term `automatic commercial ice maker' means a 
        factory-made assembly (not necessarily shipped in 1 package) 
        that--
                    ``(A) consists of a condensing unit and ice-making 
                section operating as an integrated unit, with means for 
                making and harvesting ice; and
                    ``(B) may include means for storing ice, dispensing 
                ice, or storing and dispensing ice.
            ``(20) The term `commercial clothes washer' means a soft-
        mount front-loading or soft-mount top-loading clothes washer 
        that--
                    ``(A) has a clothes container compartment that--
                            ``(i) for horizontal-axis clothes washers, 
                        is not more than 3.5 cubic feet ; and
                            ``(ii) for vertical-axis clothes washers, 
                        is not more than 4.0 cubic feet; and
                    ``(B) is designed for use in--
                            ``(i) applications in which the occupants 
                        of more than 1 household will be using the 
                        clothes washer, such as multi-family housing 
                        common areas and coin laundries; or
                            ``(ii) other commercial applications.
            ``(21) The term `harvest rate' means the amount of ice (at 
        32 degrees F) in pounds produced per 24 hours.''.
    (b) Standards for Commercial Package Air Conditioning and Heating 
Equipment.--Section 342(a) of the Energy Policy and Conservation Act 
(42 U.S.C. 6313(a)) is amended--
            (1) in the subsection heading, by striking ``Small and 
        Large'' and inserting ``Small, Large, and Very Large'';
            (2) in paragraph (1), by inserting ``but before January 1, 
        2010,'' after ``January 1, 1994,'';
            (3) in paragraph (2), by inserting ``but before January 1, 
        2010,'' after ``January 1, 1995,''; and
            (4) in paragraph (6)--
                    (A) in subparagraph (A)--
                            (i) by inserting ``(i)'' after ``(A)'';
                            (ii) by striking ``the date of enactment of 
                        the Energy Policy Act of 1992'' and inserting 
                        ``January 1, 2010'';
                            (iii) by inserting after ``large commercial 
                        package air conditioning and heating 
                        equipment,'' the following: ``and very large 
                        commercial package air conditioning and heating 
                        equipment, or if ASHRAE/IES Standard 90.1, as 
                        in effect on October 24, 1992, is amended with 
                        respect to any''; and
                            (iv) by adding at the end the following:
    ``(ii) If ASHRAE/IES Standard 90.1 is not amended with respect to 
small commercial package air conditioning and heating equipment, large 
commercial package air conditioning and heating equipment, and very 
large commercial package air conditioning and heating equipment during 
the 5-year period beginning on the effective date of a standard, the 
Secretary may initiate a rulemaking to determine whether a more 
stringent standard--
            ``(I) would result in significant additional conservation 
        of energy; and
            ``(II) is technologically feasible and economically 
        justified.''; and
                    (B) in subparagraph (C)(ii), by inserting ``and 
                very large commercial package air conditioning and 
                heating equipment'' after ``large commercial package 
                air conditioning and heating equipment''; and
            (5) by adding at the end the following:
    ``(7) Small commercial package air conditioning and heating 
equipment manufactured on or after January 1, 2010, shall meet the 
following standards:
            ``(A) The minimum energy efficiency ratio of air-cooled 
        central air conditioners at or above 65,000 Btu per hour 
        (cooling capacity) and less than 135,000 Btu per hour (cooling 
        capacity) shall be--
                    ``(i) 11.2 for equipment with no heating or 
                electric resistance heating; and
                    ``(ii) 11.0 for equipment with all other heating 
                system types that are integrated into the equipment (at 
                a standard rating of 95 degrees F db).
            ``(B) The minimum energy efficiency ratio of air-cooled 
        central air conditioner heat pumps at or above 65,000 Btu per 
        hour (cooling capacity) and less than 135,000 Btu per hour 
        (cooling capacity) shall be--
                    ``(i) 11.0 for equipment with no heating or 
                electric resistance heating; and
                    ``(ii) 10.8 for equipment with all other heating 
                system types that are integrated into the equipment (at 
                a standard rating of 95 degrees F db).
            ``(C) The minimum coefficient of performance in the heating 
        mode of air-cooled central air conditioning heat pumps at or 
        above 65,000 Btu per hour (cooling capacity) and less than 
        135,000 Btu per hour (cooling capacity) shall be 3.3 (at a high 
        temperature rating of 47 degrees F db).
    ``(8) Large commercial package air conditioning and heating 
equipment manufactured on or after January 1, 2010, shall meet the 
following standards:
            ``(A) The minimum energy efficiency ratio of air-cooled 
        central air conditioners at or above 135,000 Btu per hour 
        (cooling capacity) and less than 240,000 Btu per hour (cooling 
        capacity) shall be--
                    ``(i) 11.0 for equipment with no heating or 
                electric resistance heating; and
                    ``(ii) 10.8 for equipment with all other heating 
                system types that are integrated into the equipment (at 
                a standard rating of 95 degrees F db).
            ``(B) The minimum energy efficiency ratio of air-cooled 
        central air conditioner heat pumps at or above 135,000 Btu per 
        hour (cooling capacity) and less than 240,000 Btu per hour 
        (cooling capacity) shall be--
                    ``(i) 10.6 for equipment with no heating or 
                electric resistance heating; and
                    ``(ii) 10.4 for equipment with all other heating 
                system types that are integrated into the equipment (at 
                a standard rating of 95 degrees F db).
            ``(C) The minimum coefficient of performance in the heating 
        mode of air-cooled central air conditioning heat pumps at or 
        above 135,000 Btu per hour (cooling capacity) and less than 
        240,000 Btu per hour (cooling capacity) shall be 3.2 (at a high 
        temperature rating of 47 degrees F db).
    ``(9) Very large commercial package air conditioning and heating 
equipment manufactured on or after January 1, 2010, shall meet the 
following standards:
            ``(A) The minimum energy efficiency ratio of air-cooled 
        central air conditioners at or above 240,000 Btu per hour 
        (cooling capacity) and less than 760,000 Btu per hour (cooling 
        capacity) shall be--
                    ``(i) 10.0 for equipment with no heating or 
                electric resistance heating; and
                    ``(ii) 9.8 for equipment with all other heating 
                system types that are integrated into the equipment (at 
                a standard rating of 95 degrees F db).
            ``(B) The minimum energy efficiency ratio of air-cooled 
        central air conditioner heat pumps at or above 240,000 Btu per 
        hour (cooling capacity) and less than 760,000 Btu per hour 
        (cooling capacity) shall be--
                    ``(i) 9.5 for equipment with no heating or electric 
                resistance heating; and
                    ``(ii) 9.3 for equipment with all other heating 
                system types that are integrated into the equipment (at 
                a standard rating of 95 degrees F db).
            ``(C) The minimum coefficient of performance in the heating 
        mode of air-cooled central air conditioning heat pumps at or 
        above 240,000 Btu per hour (cooling capacity) and less than 
        760,000 Btu per hour (cooling capacity) shall be 3.2 (at a high 
        temperature rating of 47 degrees F db).''.
    (c) Standards for Commercial Refrigerators, Freezers, and 
Refrigerator-Freezers.--Section 342 of the Energy Policy and 
Conservation Act (42 U.S.C. 6313) is amended by adding at the end the 
following:
    ``(c) Commercial Refrigerators, Freezers, and Refrigerator-
Freezers.--(1) In this subsection:
            ``(A) The term `AV' means the adjusted volume 
        (ft<SUP>3</SUP>) (defined as 1.63 x frozen temperature 
        compartment volume (ft<SUP>3</SUP>) + chilled temperature 
        compartment volume (ft<SUP>3</SUP>)) with compartment volumes 
        measured in accordance with the Association of Home Appliance 
        Manufacturers Standard HRF1-1979.
            ``(B) The term `V' means the chilled or frozen compartment 
        volume (ft<SUP>3</SUP>) (as defined in the Association of Home 
        Appliance Manufacturers Standard HRF1-1979).
            ``(C) Other terms have such meanings as may be established 
        by the Secretary, based on industry-accepted definitions and 
        practice.
    ``(2) Each commercial refrigerator, freezer, and refrigerator-
freezer with a self-contained condensing unit designed for holding 
temperature applications manufactured on or after January 1, 2010, 
shall have a daily energy consumption (in kilowatt hours per day) that 
does not exceed the following:

``Refrigerators with solid doors..  0.10 V + 2.04
Refrigerators with transparent      0.12 V + 3.34
 doors.
Freezers with solid doors.........  0.40 V + 1.38
Freezers with transparent doors...  0.75 V + 4.10
Refrigerators/freezers with solid   0.27 AV - 0.71 or 0.70.
 doors the greater of.

    ``(3) Each commercial refrigerator with a self-contained condensing 
unit designed for pull-down temperature applications and transparent 
doors manufactured on or after January 1, 2010, shall have a daily 
energy consumption (in kilowatt hours per day) of not more than 0.126 V 
+ 3.51.
    ``(4)(A) Not later than January 1, 2009, the Secretary shall issue, 
by rule, standard levels for ice-cream freezers, self-contained 
commercial refrigerators, freezers, and refrigerator-freezers without 
doors, and remote condensing commercial refrigerators, freezers, and 
refrigerator-freezers, with the standard levels effective for equipment 
manufactured on or after January 1, 2012.
    ``(B) The Secretary may issue, by rule, standard levels for other 
types of commercial refrigerators, freezers, and refrigerator-freezers 
not covered by paragraph (2)(A) with the standard levels effective for 
equipment manufactured 3 or more years after the date on which the 
final rule is published.
    ``(5)(A) Not later than January 1, 2013, the Secretary shall issue 
a final rule to determine whether the standards established under this 
subsection should be amended.
    ``(B) Not later than 3 years after the effective date of any 
amended standards under subparagraph (A) or the publication of a final 
rule determining that the standards should not be amended, the 
Secretary shall issue a final rule to determine whether the standards 
established under this subsection or the amended standards, as 
applicable, should be amended.
    ``(C) If the Secretary issues a final rule under subparagraph (A) 
or (B) establishing amended standards, the final rule shall provide 
that the amended standards apply to products manufactured on or after 
the date that is--
            ``(i) 3 years after the date on which the final amended 
        standard is published; or
            ``(ii) if the Secretary determines, by rule, that 3 years 
        is inadequate, not later than 5 years after the date on which 
        the final rule is published.''.
    (d) Standards for Automatic Commercial Ice Makers.--Section 342 of 
the Energy Policy and Conservation Act (42 U.S.C. 6313) (as amended by 
subsection (c)) is amended by adding at the end the following:
    ``(d) Automatic Commercial Ice Makers.--(1) Each automatic 
commercial ice maker that produces cube type ice with capacities 
between 50 and 2500 pounds per 24-hour period when tested according to 
the test standard established in section 343(a)(7) and is manufactured 
on or after January 1, 2010, shall meet the following standard levels:


----------------------------------------------------------------------------------------------------------------
                                                                                                     Maximum
                                                        Harvest rate (lbs   Maximum energy use   condenser water
        ``Equipment type            Type of cooling       ice/24 hours)      (kWh/100 lbs ice)  use (gal/100 lbs
                                                                                                      ice)
----------------------------------------------------------------------------------------------------------------
Ice Making Head                   Water                <500                 7.80-0.0055H              200-0.022H
                                                       > or = 500 and       5.58-0.0011H              200-0.022H
                                                        <1436
                                                       > or = 1436          4.0                       200-0.022H
Ice making head                   Air                  <450                 10.26-0.0086H         Not applicable
                                                       > or = 450           6.89-0.0011H          Not applicable
Remote Condensing (but not        Air                  <1000                8.85-0.0038H          Not applicable
 remote compressor)
                                                       > or = 1000          5.10                  Not applicable
Remote Condensing and Remote      Air                  <934                 8.85-0.0038H          Not applicable
 Compressor
                                                       > or = 934           5.3                   Not applicable
----------------------------------------------------------------------------------------------------------------

    ``(2)(A) The Secretary may issue, by rule, standard levels for 
types of automatic commercial ice makers that are not covered by 
paragraph (1).
    ``(B) The standards established under subparagraph (A) shall apply 
to products manufactured on or after the date that is--
            ``(i) 3 years after the date on which the rule is published 
        under subparagraph (A); or
            ``(ii) if the Secretary determines, by rule, that 3 years 
        is inadequate, not later than 5 years after the date on which 
        the final rule is published.
    ``(3)(A) Not later than January 1, 2015, with respect to the 
standards established under paragraph (1), and, with respect to the 
standards established under paragraph (2), not later than 5 years after 
the date on which the standards take effect, the Secretary shall issue 
a final rule to determine whether amending the applicable standards is 
technologically feasible and economically justified.
    ``(B) Not later than 5 years after the effective date of any 
amended standards under subparagraph (A) or the publication of a final 
rule determining that amending the standards is not technologically 
feasible or economically justified, the Secretary shall issue a final 
rule to determine whether amending the standards established under 
paragraph (1) or the amended standards, as applicable, is 
technologically feasible or economically justified.
    ``(C) If the Secretary issues a final rule under subparagraph (A) 
or (B) establishing amended standards, the final rule shall provide 
that the amended standards apply to products manufactured on or after 
the date that is--
            ``(i) 3 years after the date on which the final amended 
        standard is published; or
            ``(ii) if the Secretary determines, by rule, that 3 years 
        is inadequate, not later than 5 years after the date on which 
        the final amended standard is published.
    ``(4) A final rule issued under paragraph (2) or (3) shall 
establish standards at the maximum level that is technically feasible 
and economically justified, as provided in subsections (o) and (p) of 
section 325.''.
    (e) Standards for Commercial Clothes Washers.--Section 342 of the 
Energy Policy and Conservation Act (42 U.S.C. 6313) (as amended by 
subsection (d)) is amended by adding at the end the following:
    ``(e) Commercial Clothes Washers.--(1) Each commercial clothes 
washer manufactured on or after January 1, 2007, shall have--
            ``(A) a Modified Energy Factor of at least 1.26; and
            ``(B) a Water Factor of not more than 9.5.
    ``(2)(A)(i) Not later than January 1, 2010, the Secretary shall 
publish a final rule to determine whether the standards established 
under paragraph (1) should be amended.
    ``(ii) The rule published under clause (i) shall provide that any 
amended standard shall apply to products manufactured 3 years after the 
date on which the final amended standard is published.
    ``(B)(i) Not later than January 1, 2015, the Secretary shall 
publish a final rule to determine whether the standards established 
under paragraph (1) should be amended.
    ``(ii) The rule published under clause (i) shall provide that any 
amended standard shall apply to products manufactured 3 years after the 
date on which the final amended standard is published.''.
    (f) Test Procedures.--Section 343 of the Energy Policy and 
Conservation Act (42 U.S.C. 6314) is amended--
            (1) in subsection (a)--
                    (A) in paragraph (4)--
                            (i) in subparagraph (A), by inserting 
                        ``very large commercial package air 
                        conditioning and heating equipment,'' after 
                        ``large commercial package air conditioning and 
                        heating equipment,''; and
                            (ii) in subparagraph (B), by inserting 
                        ``very large commercial package air 
                        conditioning and heating equipment,'' after 
                        ``large commercial package air conditioning and 
                        heating equipment,''; and
                    (B) by adding at the end the following:
    ``(6)(A)(i) In the case of commercial refrigerators, freezers, and 
refrigerator-freezers, the test procedures shall be--
            ``(I) the test procedures determined by the Secretary to be 
        generally accepted industry testing procedures; or
            ``(II) rating procedures developed or recognized by the 
        ASHRAE or by the American National Standards Institute.
    ``(ii) In the case of self-contained refrigerators, freezers, and 
refrigerator-freezers to which standards are applicable under 
paragraphs (2) and (3) of section 342(c), the initial test procedures 
shall be the ASHRAE 117 test procedure that is in effect on January 1, 
2005.
    ``(B) In the case of commercial refrigerators, freezers, and 
refrigerators-freezers with doors covered by the standards adopted in 
February 2002, by the California Energy Commission, the rating 
temperatures shall be the integrated average temperature of 38 degrees 
F (plus or minus 2 degrees F) for refrigerator compartments and 0 
degrees F (plus or minus 2 degrees F) for freezer compartments.
    ``(C) The Secretary shall issue a rule in accordance with 
paragraphs (2) and (3) to establish the appropriate rating temperatures 
for the other products for which standards will be established under 
subsection 342(c)(4).
    ``(D) In establishing the appropriate test temperatures under this 
subparagraph, the Secretary shall follow the procedures and meet the 
requirements under section 323(e).
    ``(E)(i) Not later than 180 days after the publication of the new 
ASHRAE 117 test procedure, if the ASHRAE 117 test procedure for 
commercial refrigerators, freezers, and refrigerator-freezers is 
amended, the Secretary shall, by rule, amend the test procedure for the 
product as necessary to ensure that the test procedure is consistent 
with the amended ASHRAE 117 test procedure, unless the Secretary makes 
a determination, by rule, and supported by clear and convincing 
evidence, that to do so would not meet the requirements for test 
procedures under paragraphs (2) and (3).
    ``(ii) If the Secretary determines that 180 days is an insufficient 
period during which to review and adopt the amended test procedure or 
rating procedure under clause (i), the Secretary shall publish a notice 
in the Federal Register stating the intent of the Secretary to wait not 
longer than 1 additional year before putting into effect an amended 
test procedure or rating procedure.
    ``(F)(i) If a test procedure other than the ASHRAE 117 test 
procedure is approved by the American National Standards Institute, the 
Secretary shall, by rule--
            ``(I) review the relative strengths and weaknesses of the 
        new test procedure relative to the ASHRAE 117 test procedure; 
        and
            ``(II) based on that review, adopt 1 new test procedure for 
        use in the standards program.
    ``(ii) If a new test procedure is adopted under clause (i)--
            ``(I) section 323(e) shall apply; and
            ``(II) subparagraph (B) shall apply to the adopted test 
        procedure.
    ``(7)(A) In the case of automatic commercial ice makers, the test 
procedures shall be the test procedures specified in Air-Conditioning 
and Refrigeration Institute Standard 810-2003, as in effect on January 
1, 2005.
    ``(B)(i) If Air-Conditioning and Refrigeration Institute Standard 
810-2003 is amended, the Secretary shall amend the test procedures 
established in subparagraph (A) as necessary to be consistent with the 
amended Air-Conditioning and Refrigeration Institute Standard, unless 
the Secretary determines, by rule, published in the Federal Register 
and supported by clear and convincing evidence, that to do so would not 
meet the requirements for test procedures under paragraphs (2) and (3).
    ``(ii) If the Secretary issues a rule under clause (i) containing a 
determination described in clause (ii), the rule may establish an 
amended test procedure for the product that meets the requirements of 
paragraphs (2) and (3).
    ``(C) The Secretary shall comply with section 323(e) in 
establishing any amended test procedure under this paragraph.
    ``(8) With respect to commercial clothes washers, the test 
procedures shall be the same as the test procedures established by the 
Secretary for residential clothes washers under section 325(g).''; and
            (2) in subsection (d)(1), by inserting ``very large 
        commercial package air conditioning and heating equipment, 
        commercial refrigerators, freezers, and refrigerator-freezers, 
        automatic commercial ice makers, commercial clothes washers,'' 
        after ``large commercial package air conditioning and heating 
        equipment,''.
    (g) Labeling.--Section 344(e) of the Energy Policy and Conservation 
Act (42 U.S.C. 6315(e)) is amended by inserting ``very large commercial 
package air conditioning and heating equipment, commercial 
refrigerators, freezers, and refrigerator-freezers, automatic 
commercial ice makers, commercial clothes washers,'' after ``large 
commercial package air conditioning and heating equipment,'' each place 
it appears.
    (h) Administration, Penalties, Enforcement, and Preemption.--
Section 345 of the Energy Policy and Conservation Act (42 U.S.C. 6316) 
is amended--
            (1) in subsection (a)--
                    (A) in paragraph (7), by striking ``and'' at the 
                end;
                    (B) in paragraph (8), by striking the period at the 
                end and inserting ``; and''; and
                    (C) by adding at the end the following:
            ``(9) in the case of commercial clothes washers, section 
        327(b)(1) shall be applied as if the National Appliance Energy 
        Conservation Act of 1987 was the Energy Policy Act of 2005.'';
            (2) in the first sentence of subsection (b)(1), by striking 
        ``part B'' and inserting ``part A''; and
            (3) by adding at the end the following:
    ``(d)(1) Except as provided in paragraphs (2) and (3), section 327 
shall apply with respect to very large commercial package air 
conditioning and heating equipment to the same extent and in the same 
manner as section 327 applies under part A on the date of enactment of 
this subsection.
    ``(2) Any State or local standard issued before the date of 
enactment of this subsection shall not be preempted until the standards 
established under section 342(a)(9) take effect on January 1, 2010.
    ``(e)(1)(A) Subsections (a), (b), and (d) of section 326, 
subsections (m) through (s) of section 325, and sections 328 through 
336 shall apply with respect to commercial refrigerators, freezers, and 
refrigerator-freezers to the same extent and in the same manner as 
those provisions apply under part A.
    ``(B) In applying those provisions to commercial refrigerators, 
freezers, and refrigerator-freezers, paragraphs (1), (2), (3), and (4) 
of subsection (a) shall apply.
    ``(2)(A) Section 327 shall apply to commercial refrigerators, 
freezers, and refrigerator-freezers for which standards are established 
under paragraphs (2) and (3) of section 342(c) to the same extent and 
in the same manner as those provisions apply under part A on the date 
of enactment of this subsection, except that any State or local 
standard issued before the date of enactment of this subsection shall 
not be preempted until the standards established under paragraphs (2) 
and (3) of section 342(c) take effect.
    ``(B) In applying section 327 in accordance with subparagraph (A), 
paragraphs (1), (2), and (3) of subsection (a) shall apply.
    ``(3)(A) Section 327 shall apply to commercial refrigerators, 
freezers, and refrigerator-freezers for which standards are established 
under section 342(c)(4) to the same extent and in the same manner as 
the provisions apply under part A on the date of publication of the 
final rule by the Secretary, except that any State or local standard 
issued before the date of publication of the final rule by the 
Secretary shall not be preempted until the standards take effect.
    ``(B) In applying section 327 in accordance with subparagraph (A), 
paragraphs (1), (2), and (3) of subsection (a) shall apply.
    ``(4)(A) If the Secretary does not issue a final rule for a 
specific type of commercial refrigerator, freezer, or refrigerator-
freezer within the time frame specified in section 342(c)(5), 
subsections (b) and (c) of section 327 shall not apply to that specific 
type of refrigerator, freezer, or refrigerator-freezer for the period 
beginning on the date that is 2 years after the scheduled date for a 
final rule and ending on the date on which the Secretary publishes a 
final rule covering the specific type of refrigerator, freezer, or 
refrigerator-freezer.
    ``(B) Any State or local standard issued before the date of 
publication of the final rule shall not be preempted until the final 
rule takes effect.
    ``(5)(A) In the case of any commercial refrigerator, freezer, or 
refrigerator-freezer to which standards are applicable under paragraphs 
(2) and (3) of section 342(c), the Secretary shall require 
manufacturers to certify, through an independent, nationally recognized 
testing or certification program, that the commercial refrigerator, 
freezer, or refrigerator-freezer meets the applicable standard.
    ``(B) The Secretary shall, to the maximum extent practicable, 
encourage the establishment of at least 2 independent testing and 
certification programs.
    ``(C) As part of certification, information on equipment energy use 
and interior volume shall be made available to the Secretary.
    ``(e)(1)(A)(i) Except as provided in clause (ii), section 327 shall 
apply to automatic commercial ice makers for which standards have been 
established under section 342(d)(1) to the same extent and in the same 
manner as the section applies under part A on the date of enactment of 
this subsection.
    ``(ii) Any State standard issued before the date of enactment of 
this subsection shall not be preempted until the standards established 
under section 342(d)(1) take effect.
    ``(B) In applying section 327 to the equipment under subparagraph 
(A), paragraphs (1), (2), and (3) of subsection (a) shall apply.
    ``(2)(A)(i) Except as provided in clause (ii), section 327 shall 
apply to automatic commercial ice makers for which standards have been 
established under section 342(d)(2) to the same extent and in the same 
manner as the section applies under part A on the date of publication 
of the final rule by the Secretary.
    ``(ii) Any State standard issued before the date of publication of 
the final rule by the Secretary shall not be preempted until the 
standards established under section 342(d)(2) take effect.
    ``(B) In applying section 327 in accordance with subparagraph (A), 
paragraphs (1), (2), and (3) of subsection (a) shall apply.
    ``(3)(A) If the Secretary does not issue a final rule for a 
specific type of automatic commercial ice maker within the time frame 
specified in subsection 342(d), subsections (b) and (c) of section 327 
shall no longer apply to the specific type of automatic commercial ice 
maker for the period beginning on the day after the scheduled date for 
a final rule and ending on the date on which the Secretary publishes a 
final rule covering the specific type of automatic commercial ice 
maker.
    ``(B) Any State standard issued before the publication of the final 
rule shall not be preempted until the standards established in the 
final rule take effect.
    ``(4)(A) The Secretary shall monitor whether manufacturers are 
reducing harvest rates below tested values for the purpose of bringing 
non-complying equipment into compliance.
    ``(B) If the Secretary finds that there has been a substantial 
amount of manipulation with respect to harvest rates under subparagraph 
(A), the Secretary shall take steps to minimize the manipulation, such 
as requiring harvest rates to be within 5 percent of tested values.
    ``(g)(1)(A) If the Secretary does not issue a final rule for 
commercial clothes washers within the timeframe specified in section 
342(e)(2), subsections (b) and (c) of section 327 shall not apply to 
commercial clothes washers for the period beginning on the day after 
the scheduled date for a final rule and ending on the date on which the 
Secretary publishes a final rule covering commercial clothes washers.
    ``(B) Any State or local standard issued before the date on which 
the Secretary publishes a final rule shall not be preempted until the 
standards established under section 342(e)(2) take effect.
    ``(2) The Secretary shall undertake an educational program to 
inform owners of laundromats, multifamily housing, and other sites 
where commercial clothes washers are located about the new standard, 
including impacts on washer purchase costs and options for recovering 
those costs through coin collection.''.

SEC. 103. ENERGY LABELING.

    (a) Rulemaking on Effectiveness of Consumer Product Labeling.--
Section 324(a)(2) of the Energy Policy and Conservation Act (42 U.S.C. 
6294(a)(2)) is amended by adding at the end the following:
                    ``(F)(i) Not later than 90 days after the date of 
                enactment of this subparagraph, the Commission shall 
                initiate a rulemaking to consider--
                            ``(I) the effectiveness of the consumer 
                        products labeling program in assisting 
                        consumers in making purchasing decisions and 
                        improving energy efficiency; and
                            ``(II) changes to the labeling rules 
                        (including categorical labeling) that would 
                        improve the effectiveness of consumer product 
                        labels.
                    ``(ii) Not later than 2 years after the date of 
                enactment of this subparagraph, the Commission shall 
                complete the rulemaking initiated under clause (i).''.
    (b) Rulemaking on Labeling for Additional Products.--Section 324(a) 
of the Energy Policy and Conservation Act (42 U.S.C. 6294(a)) is 
amended by adding at the end the following:
            ``(5)(A) For covered products described in subsections (u) 
        through (ee) of section 325, after a test procedure has been 
        prescribed under section 323, the Secretary or the Commission, 
        as appropriate, may prescribe, by rule, under this section 
        labeling requirements for the products.
            ``(B) In the case of products to which TP-1 standards under 
        section 325(y) apply, labeling requirements shall be based on 
        the `Standard for the Labeling of Distribution Transformer 
        Efficiency' prescribed by the National Electrical Manufacturers 
        Association (NEMA TP-3) as in effect on the date of enactment 
        of this paragraph.
            ``(C) In the case of dehumidifiers covered under section 
        325(dd), the Commission shall not require an `Energy Guide' 
        label.''.

SEC. 104. EQUIPMENT STANDARDS AND ANALYSIS PROGRAM.

    (a) In General.--Not later than 180 days after the date of 
enactment of this Act, the Secretary shall submit to Congress a report 
that--
            (1) explains the reasons for the failure of the Secretary 
        to complete, by any applicable deadlines, required rulemakings 
        under the equipment standards and analysis program for issuance 
        of appliance and equipment standards; and
            (2) provides plans and timetables for completion of each of 
        the rulemakings described in paragraph (1) that has not been 
        completed as of the date of enactment of this Act.
    (b) Authorization of Appropriations.--There are authorized to be 
appropriated to the Secretary to carry out the equipment standards and 
analysis program of the Department of Energy--
            (1) $20,000,000 for fiscal year 2006;
            (2) $25,000,000 for fiscal year 2007;
            (3) $30,000,000 for fiscal year 2008;
            (4) $35,000,000 for fiscal year 2009; and
            (5) $40,000,000 for fiscal year 2010.

                   Subtitle B--Building Energy Codes

SEC. 111. STATE BUILDING ENERGY EFFICIENCY CODES INCENTIVES.

    Section 304 of the Energy Conservation and Production Act (42 
U.S.C. 6833) is amended in subsection (e)--
            (1) in paragraph (1) by inserting at the end of the first 
        sentence ``, including increasing and verifying compliance with 
        such codes''; and
            (2) by striking paragraph (2) and inserting the following:
            ``(2) Additional funding shall be provided under this 
        subsection for implementations of a plan to achieve and 
        document at least 90 percent rate of compliance with 
        residential and commercial building energy efficiency codes, 
        based on energy performance--
                    ``(A) to a State that has adopted and is 
                implementing, on a statewide basis--
                            ``(i) a residential building energy 
                        efficiency code that meets or exceeds the 
                        requirements of the 2004 International Energy 
                        Conservation Code, or any succeeding version of 
                        this code that has received an affirmative 
                        determination from the Secretary under 
                        subsection (a)(5)(A) of this section; and
                            ``(ii) a commercial building energy 
                        efficiency code that meets or exceeds the 
                        requirements of the ASHRAE Standard 90.1-2004, 
                        or any succeeding version of this standard that 
                        has received an affirmative determination from 
                        the Secretary under subsection (b)(2)(A) of 
                        this section; or
                    ``(B) in States in which there is no statewide 
                energy code either for residential buildings or for 
                commercial buildings, to a local government that has 
                adopted and is implementing residential and commercial 
                building energy efficiency codes as described in 
                subparagraph (A).
            ``(3) Of the amounts made available under this part, the 
        Secretary may use $500,000 for each fiscal year to train State 
        and local officials.
            ``(4)(A) There is authorized to be appropriated to carry 
        out this subsection $25,000,000 for each of fiscal years 2006 
        through 2010, and such sums as may be necessary for each fiscal 
        year after 2010.
            ``(B) Funding to States under paragraph (2) in each fiscal 
        year shall not exceed half of the excess of funding under this 
        subsection over $5,000,000.''.

SEC. 112. ENERGY CODE APPLICABLE TO MANUFACTURED HOUSING.

    Section 604 of the National Manufacturing Housing Construction and 
Safety Standards Act of 1974 (42 U.S.C. 5403) is amended in subsection 
(g) by striking paragraphs (2) and (3) and inserting the following:
            ``(2) The energy conservation standards established under 
        this subsection shall be based on the most recent version of 
        the International Energy Conservation Code (including 
        supplements) except where the Secretary finds that such code is 
        not cost-effective, or a more stringent standard would be more 
        cost-effective, based on total life-cycle construction and 
        operating costs.
            ``(3) The energy conservation standards established under 
        this subsection may--
                    ``(A) take into consideration the design and 
                factory construction techniques of manufactured homes;
                    ``(B) be based on the climate zones established by 
                the Department of Housing and Urban Development rather 
                than those under the International Energy Conservation 
                Code; and
                    ``(C) provide for alternative practices that result 
                in net estimated energy consumption equal to or less 
                than the specified standards.''.

SEC. 113. ENERGY EFFICIENCY STANDARDS.

    Section 109 of the Cranston-Gonzalez National Affordable Housing 
Act (42 U.S.C. 12709) is amended--
            (1) in subsection (a)--
                    (A) in paragraph (1)--
                            (i) by striking ``1 year after the date of 
                        the enactment of the Energy Policy Act of 
                        1992'' and inserting ``September 30, 2006'';
                            (ii) in subparagraph (A), by striking 
                        ``and'' at the end;
                            (iii) in subparagraph (B), by striking the 
                        period at the end and inserting ``; and''; and
                            (iv) by adding at the end the following:
                    ``(C) rehabilitation and new construction of public 
                and assisted housing funded by HOPE VI revitalization 
                grants under section 24 of the United States Housing 
                Act of 1937 (42 U.S.C. 1437v), where such standards are 
                determined to be cost effective by the Secretary of 
                Housing and Urban Development.''; and
                    (B) in paragraph (2), by striking ``Council of 
                American'' and all that follows through ``90.1-1989'' 
                and inserting ``2004 International Energy Conservation 
                Code'';
            (2) in subsection (b)--
                    (A) by striking ``within 1 year after the date of 
                the enactment of the Energy Policy Act of 1992'' and 
                inserting ``by September 30, 2006''; and
                    (B) by striking ``CABO'' and all that follows 
                through ``1989'' and inserting ``the 2004 International 
                Energy Conservation Code''; and
            (3) in subsection (c)--
                    (A) in the heading, by striking ``model energy 
                code'' and inserting ``and the international energy 
                conservation code'' after ; and
                    (B) by striking ``CABO'' and alll that follows 
                through ``1989'' and inserting ``the 2004 International 
                Energy Conservation Code''.
            (4) by adding at the end the following:
    ``(d) If the Secretaries have not, within 1 year after the 
requirements of the 2004 International Energy Conservation Code are 
revised, amended the standards or made a determination under subsection 
(c) of this section, and if the Secretary of Energy has made a 
determination under section 304 of the Energy Conservation and 
Production Act (42 U.S.C. 6833) that the revised code would improve 
energy efficiency, all new construction of housing specified in 
subsection (a) shall meet the requirements of the revised International 
Energy Conservation Code.''.

                        Subtitle C--Energy Star

SEC. 121. ENERGY STAR PROGRAM.

    (a) In General.--The Energy Policy and Conservation Act is amended 
by inserting after section 324 (42 U.S.C. 6294) the following:

                         ``energy star program

    ``Sec. 324A. (a) In General.--There is established within the 
Department of Energy and the Environmental Protection Agency a 
voluntary program to identify and promote energy-efficient products and 
buildings in order to reduce energy consumption, improve energy 
security, and reduce pollution through voluntary labeling of, or other 
forms of communication about, products and buildings that meet the 
highest energy efficiency standards.
    ``(b) Division of Responsibilities.--Responsibilities under the 
program shall be divided between the Department of Energy and the 
Environmental Protection Agency in accordance with the terms of 
applicable agreements between those agencies.
    ``(c) Duties.--The Administrator and the Secretary shall--
            ``(1) promote Energy Star compliant technologies as the 
        preferred technologies in the marketplace for--
                    ``(A) achieving energy efficiency; and
                    ``(B) reducing pollution;
            ``(2) work to enhance public awareness of the Energy Star 
        label, including by providing special outreach to small 
        businesses;
            ``(3) preserve the integrity of the Energy Star label by--
                    ``(A) regularly updating Energy Star criteria; and
                    ``(B) ensuring, in general, that--
                            ``(i) not more than 25 percent of available 
                        models in a product class receive the Energy 
                        Star designation; and
                            ``(ii) Energy Star designated products and 
                        buildings are at least 10 percent more 
                        efficient than--
                                    ``(I) appliance standards in effect 
                                on the date of enactment of this 
                                section; and
                                    ``(II) the most recent model energy 
                                code;
            ``(4) solicit comments from interested parties prior to 
        establishing or revising an Energy Star product category, 
        specification, or criterion (or prior to effective dates for 
        any such product category, specification, or criterion);
            ``(5) on adoption of a new or revised product category, 
        specification, or criterion, provide reasonable notice to 
        interested parties of any changes (including effective dates) 
        in product categories, specifications, or criteria, along 
        with--
                    ``(A) an explanation of the changes; and
                    ``(B) as appropriate, responses to comments 
                submitted by interested parties; and
            ``(6) provide appropriate lead time (which shall be 270 
        days, unless the Agency or Department specifies otherwise) 
        prior to the applicable effective date for a new or a 
        significant revision to a product category, specification, or 
        criterion, taking into account the timing requirements of the 
        manufacturing, product marketing, and distribution process for 
        the specific product addressed.
    ``(d) Authorization of Appropriations.--There are authorized to be 
appropriated to carry out this section--
            ``(1) $70,000,000 for fiscal year 2006;
            ``(2) $90,000,000 for fiscal year 2007;
            ``(3) $110,000,000 for fiscal year 2008;
            ``(4) $130,000,000 for fiscal year 2009; and
            ``(5) $150,000,000 for fiscal year 2010.''.
    (b) Table of Contents Amendment.--The table of contents of the 
Energy Policy and Conservation Act (42 U.S.C. prec. 6201) is amended by 
inserting after the item relating to section 324 the following:

``324A. Energy Star program.''.

                     Subtitle D--Federal Buildings

SEC. 131. FEDERAL BUILDING PERFORMANCE STANDARDS.

    Section 305(a) of the Energy Conservation and Production Act (42 
U.S.C. 6834(a)) is amended--
            (1) in paragraph (2)(A)--
                    (A) by striking ``CABO Model Energy Code, 1992'' 
                and inserting ``the 2004 International Energy 
                Conservation Code''; and
                    (B) by striking ``90.1-1989'' and inserting ``90.1-
                2004''; and
            (2) by adding at the end the following:
    ``(3)(A)(i) Unless demonstrated not to be life-cycle cost-
effective, for each new and renovated Federal building--
            ``(I) such building be designed, constructed, commissioned, 
        and operated so as to achieve energy consumption levels at 
        least 30 percent below those of the version current as of the 
        date of enactment of this paragraph of the ASHRAE Standard or 
        the International Energy Conservation Code, as appropriate; and
            ``(II) sustainable design principles are applied to the 
        siting, design, construction, operation, and maintenance of all 
        new and replacement buildings; and
    ``(ii) where water is used to achieve energy efficiency, water 
conservation technologies shall be applied to the extent they are life-
cycle cost effective.
    ``(B) Not later than 1 year after the date of approval of each 
subsequent revision of the ASHRAE Standard or the International Energy 
Conservation Code, as appropriate, the Secretary of Energy shall 
determine (based on the cost-effectiveness of the requirements under 
the amendments) whether the revised standards established under this 
paragraph should be updated to reflect the amendments.
    ``(C) In the budget request of the Federal agency for each fiscal 
year and each report submitted by the Federal agency under section 
548(a) of the National Energy Conservation Policy Act (42 U.S.C. 
8258(a)), the head of each Federal agency shall include--
            ``(i) a list of all new Federal buildings owned, operated, 
        or controlled by the Federal agency; and
            ``(ii) a statement concerning whether the Federal buildings 
        meet or exceed the revised standards established under this 
        paragraph.
    ``(4) All housing constructed under the military housing 
privatization initiative of the Department of Defense shall, where such 
designations and products are available--
            ``(A) be Energy Star qualified;
            ``(B) be equipped with Energy Star appliances and FEMP 
        designated appliances; and
            ``(C) include Energy Star lighting.''.

                        TITLE II--TRANSPORTATION

SEC. 201. ALTERNATIVE COMPLIANCE WITH FLEET RULES.

    (a) Use of Alternative Fuels by Dual-Fueled Vehicles.--Section 
400AA(a)(3)(E) of the Energy Policy and Conservation Act (42 U.S.C. 
6374(a)(3)(E)) is amended to read as follows:
    ``(E)(i) Dual fueled vehicles acquired pursuant to this section 
shall be operated on alternative fuels unless the Secretary determines 
that an agency qualifies for a waiver of that requirement for vehicles 
operated by the agency in a particular geographic area in which--
            ``(I) the alternative fuel otherwise required to be used in 
        the vehicle is not reasonably available to retail purchasers of 
        the fuel, as certified to the Secretary by the head of the 
        agency; or
            ``(II) the cost of the alternative fuel otherwise required 
        to be used in the vehicle is unreasonably more expensive 
        compared to gasoline, as certified to the Secretary by the head 
        of the agency.
    ``(ii) The Secretary shall monitor compliance with this 
subparagraph by all agency fleets and shall submit annually to Congress 
a report that--
            ``(I) describes the extent to which the requirements of 
        this subparagraph are being achieved; and
            ``(II) includes information on annual reductions achieved 
        from the use of petroleum-based fuels and the problems, if any, 
        encountered in acquiring alternative fuels.''.
    (b) Alternative Compliance and Flexibility.--
            (1) Alternative compliance.--Title V of the Energy Policy 
        Act of 1992 (42 U.S.C. 13251 et seq.) is amended--
                    (A) by redesignating section 514 as section 515; 
                and
                    (B) by inserting after section 513 the following:

``SEC. 514. ALTERNATIVE COMPLIANCE.

    ``(a) Application for Waiver.--Any head of a Federal agency 
described in section 303(b)(3), any covered person subject to section 
501, and any State subject to section 507(o) may petition the Secretary 
for a waiver of the applicable requirements of section 303, 501, or 
507(o).
    ``(b) Grant of Waiver.--The Secretary may grant a waiver of the 
requirements of section 303, 501, or 507(o) upon a showing that the 
fleet owned, operated, leased, or otherwise controlled by the Federal 
agency, State, or covered person--
            ``(1) will achieve a reduction in its annual consumption of 
        petroleum fuels equal to the reduction in consumption of 
        petroleum that would result from 100 percent compliance with 
        fuel use requirements in section 501 or 303, as appropriate, 
        or, for entities covered under section 507(o), a reduction 
        equal to the covered State entity's consumption of alternative 
        fuels if all its alternative fuel vehicles given credit under 
        section 508 were to use alternative fuel 100 percent of the 
        time; and
            ``(2) is in compliance with all applicable vehicle emission 
        standards established by the Administrator under the Clean Air 
        Act (42 U.S.C. 7401 et seq.).
    ``(c) Revocation of Waiver.--The Secretary shall revoke any waiver 
granted under this section if the Federal agency, State, or covered 
person fails to comply with subsection (b).''.
            (2) Table of contents amendment.--The table of contents of 
        the Energy Policy Act of 1992 (42 U.S.C. prec. 13201) is 
        amended by striking the item relating to section 514 and 
        inserting the following:

``514. Alternative compliance.
``515. Authorization of appropriations.''.
    (c) Credits.--Section 508(a) of the Energy Policy Act of 1992 (42 
U.S.C. 13258(a)) is amended--
            (1) by striking ``The Secretary'' and inserting the 
        following:
            ``(1) The Secretary''; and
            (2) by adding at the end the following:
            ``(2) Not later than January 31, 2007, the Secretary 
        shall--
                    ``(A) allocate credit in an amount to be determined 
                by the Secretary for--
                            ``(i) acquisition of--
                                    ``(I) a light-duty hybrid electric 
                                vehicle;
                                    ``(II) a plug-in hybrid electric 
                                vehicle;
                                    ``(III) a fuel cell electric 
                                vehicle;
                                    ``(IV) a medium- or heavy-duty 
                                hybrid electric vehicle;
                                    ``(V) a neighborhood electric 
                                vehicle; or
                                    ``(VI) a medium- or heavy-duty 
                                dedicated vehicle; and
                            ``(ii) investment in qualified alternative 
                        fuel infrastructure or nonroad equipment, as 
                        determined by the Secretary; and
                    ``(B) allocate more than 1, but not to exceed 5, 
                credits for investment in an emerging technology 
                relating to any vehicle described in subparagraph (A) 
                to encourage--
                            ``(i) a reduction in petroleum demand;
                            ``(ii) technological advancement; and
                            ``(iii) environmental safety.''.
    (d) Federal Fleet.--Section 303 of the Energy Policy Act of 1992 
(42 U.S.C. 13212) is amended--
            (1) by redesignating subsection (f) as subsection (g); and
            (2) by inserting after subsection (e) the following:
    ``(f) Credit.--The Secretary shall allocate to a Federal fleet 
credits toward meeting the requirements of subsection (b) of this 
section under the same allocation as determined under subsection 
(a)(2)of section 508.''.

SEC. 202. STANDARDS FOR EXECUTIVE AGENCY AUTOMOBILES.

    Section 32917 of title 49, United States Code, is amended to read 
as follows:
``Sec. 32917. Standards for Executive agency automobiles
    ``(a) Definitions.--In this section:
            ``(1) The term `automobile' does not include any vehicle 
        designed for combat-related missions, law enforcement work, or 
        emergency rescue work.
            ``(2) The term `executive agency' has the meaning given 
        that term in section 105 of title 5.
            ``(3) The term `new automobile', with respect to the fleet 
        of automobiles of an executive agency, means an automobile that 
        is leased for at least 60 consecutive days or bought, by or for 
        the agency, after September 30, 2004.''.
    ``(b) Baseline Average Fuel Economy.--
            ``(1) In general.--In accordance with guidance issued under 
        subsection (d), the head of each executive agency shall 
        calculate, for all automobiles in the agency's fleet of 
        automobiles that were leased or bought as a new vehicle in 
        fiscal year 2004, the average fuel economy for the automobiles.
            ``(2) Baseline.--In this section, the average fuel economy 
        as calculated in paragraph (1) shall be the baseline average 
        fuel economy for the agency's fleet of automobiles.
    ``(c) Increase of Average Fuel Economy.--The head of an executive 
agency shall manage the procurement of automobiles for that agency so 
that not later than September 30, 2008, the average fuel economy of the 
new automobiles in the agency's fleet of automobiles is not less than 3 
miles per gallon higher than the baseline average fuel economy 
determined under subsection (b) for that fleet.
    ``(d) Calculation of Average Fuel Economy.--The Secretary of 
Transportation shall issue guidance to carry out this section, 
including guidance for the calculation of average fuel economy.''.

                          TITLE III--INDUSTRY

SEC. 301. VOLUNTARY COMMITMENTS TO REDUCE INDUSTRIAL ENERGY INTENSITY.

    (a) Definitions.--In this section:
            (1) Energy intensity.--The term ``energy intensity'' means 
        the primary energy consumed for each unit of physical output in 
        an industrial process.
            (2) Secretary.--The term ``Secretary'' means the Secretary 
        of Energy, acting in cooperation with the Administrator of the 
        Environmental Protection Agency.
    (b) Voluntary Agreements.--The Secretary shall enter into voluntary 
agreements with 1 or more entities in industrial sectors that consume 
significant quantities of primary energy for each unit of physical 
output to reduce the energy intensity of the production activities of 
the entities.
    (c) Goal.--Voluntary agreements under this section shall have as a 
goal the reduction of energy intensity by not less than 2.5 percent 
each year during the period of calendar years 2007 through 2016.
    (d) Recognition.--The Secretary, in cooperation with other 
appropriate Federal agencies, shall develop mechanisms to recognize and 
publicize the achievements of participants in voluntary agreements 
under this section.
    (e) Technical Assistance.--An entity that enters into an agreement 
under this section and continues to make a good faith effort to achieve 
the energy efficiency goals specified in the agreement shall be 
eligible to receive from the Secretary a grant or technical assistance, 
as appropriate, to assist in the achievement of those goals.
    (f) Report.--Not later than each of June 30, 2012, and June 30, 
2016, the Secretary shall submit to Congress a report that--
            (1) evaluates the success of the voluntary agreements under 
        this section;
            (2) provides independent verification of any energy savings 
        achieved as a result of the voluntary agreements below a no-
        commitment baseline for each participating firm; and
            (3) identifies incentives and other measures needed to 
        assist industries in achieving energy intensity reductions.
    (g) Authorization of Appropriations.--There is authorized to be 
appropriated to carry out this section $15,000,000 for each of fiscal 
years 2006 through 2010, and such sums as may be necessary for each 
fiscal year after 2010.

     TITLE IV--ELECTRICITY AND NATURAL GAS UTILITIES AND SUPPLIERS

SEC. 401. ENERGY EFFICIENT ELECTRIC AND NATURAL GAS UTILITIES STUDY.

    (a) In General.--Not later than 1 year after the date of enactment 
of this Act, the Secretary, in consultation with the National 
Association of Regulatory Utility Commissioners and the National 
Association of State Energy Officials, shall conduct a study of State 
and regional policies that promote cost-effective programs to reduce 
energy consumption (including energy efficiency programs) that are 
carried out by--
            (1) utilities that are subject to State regulation; and
            (2) nonregulated utilities.
    (b) Consideration.--In conducting the study under subsection (a), 
the Secretary shall take into consideration--
            (1) performance standards for achieving energy use and 
        demand reduction targets;
            (2) funding sources, including rate surcharges;
            (3) infrastructure planning approaches (including energy 
        efficiency programs) and infrastructure improvements;
            (4) the costs and benefits of consumer education programs 
        conducted by State and local governments and local utilities to 
        increase consumer awareness of energy efficiency technologies 
        and measures; and
            (5) methods of--
                    (A) removing disincentives for utilities to 
                implement energy efficiency programs;
                    (B) encouraging utilities to undertake voluntary 
                energy efficiency programs; and
                    (C) ensuring appropriate returns on energy 
                efficiency programs.
    (c) Report.--Not later than 1 year after the date of enactment of 
this Act, the Secretary shall submit to Congress a report that 
includes--
            (1) the findings of the study; and
            (2) any recommendations of the Secretary, including 
        recommendations on model policies to promote energy efficiency 
        programs.

SEC. 402. ENERGY EFFICIENCY PILOT PROGRAM.

    (a) In General.--The Secretary shall establish a pilot program 
under which the Secretary provides financial assistance to at least 3, 
but not more than 7, States to carry out pilot projects in the States 
for--
            (1) planning and adopting statewide programs that 
        encourage, for each year in which the pilot project is carried 
        out--
                    (A) energy efficiency; and
                    (B) reduction of consumption of electricity or 
                natural gas in the State by at least 0.75 percent, as 
                compared to a baseline determined by the Secretary for 
                the period preceding the implementation of the program; 
                or
            (2) for any State that has adopted a statewide program as 
        of the date of enactment of this Act, activities that reduce 
        energy consumption in the State by expanding and improving the 
        program.
    (b) Verification.--A State that receives financial assistance under 
subsection (a)(1) shall submit to the Secretary independent 
verification of any energy savings achieved through the statewide 
program.
    (c) Authorization of Appropriations.--There is authorized to be 
appropriated to carry out this section $5,000,000 for each of fiscal 
years 2006 through 2010, to remain available until expended.

SEC. 403. ENERGY EFFICIENCY RESOURCE PROGRAMS.

    (a) Electric Utility Programs.--Section 111 of the Public Utilities 
Regulatory Policy Act of 1978 (16 U.S.C. 2621) is amended by adding at 
the end the following:
    ``(e) Energy Efficiency Resource Programs.--
            ``(1) Definitions.--In this subsection:
                    ``(A) Demand baseline.--The term `demand baseline' 
                means the baseline determined by the Secretary for an 
                appropriate period preceding the implementation of an 
                energy efficiency resource program.
                    ``(B) Energy efficiency resource programs.--The 
                term `energy efficiency resource program' means an 
                energy efficiency or other demand reduction program 
                that is designed to reduce annual electricity 
                consumption or peak demand of consumers served by an 
                electric utility by a percentage of the demand baseline 
                of the utility that is equal to not less than 0.75 
                percent of the number of years during which the program 
                is in effect.
            ``(2) Public hearings; determinations.--
                    ``(A) As soon as practicable after the date of 
                enactment of this subsection, but not later than 3 
                years after that date, each State regulatory authority 
                (with respect to each electric utility over which the 
                State has ratemaking authority) and each nonregulated 
                electric utility shall, after notice, conduct a public 
                hearing on the benefits and feasibility of implementing 
                an energy efficiency resource program.
                    ``(B) A State regulatory authority or nonregulated 
                utility shall implement an energy efficiency resource 
                program if, on the basis of a hearing under 
                subparagraph (A), the State regulatory authority or 
                nonregulated utility determines that the program 
                would--
                            ``(i) benefit end-use customers;
                            ``(ii) be cost-effective based on total 
                        resource cost;
                            ``(iii) serve the public welfare; and
                            ``(iv) be feasible to implement.
            ``(3) Implementation.--
                    ``(A) State regulatory authorities.--If a State 
                regulatory authority makes a determination under 
                paragraph (2)(B), the State regulatory authority 
                shall--
                            ``(i) require each electric utility over 
                        which the State has ratemaking authority to 
                        implement an energy efficiency resource 
                        program; and
                            ``(ii) allow such a utility to recover any 
                        expenditures incurred by the utility in 
                        implementing the energy efficiency resource 
                        program.
                    ``(B) Nonregulated electric utilities.--If a 
                nonregulated electric utility makes a determination 
                under paragraph (2)(B), the utility shall implement an 
                energy efficiency resource program.
            ``(4) Updating regulations.--A State regulatory authority 
        or nonregulated utility may update periodically a determination 
        under paragraph (2)(B) to determine whether an energy 
        efficiency resource program should be--
                    ``(A) continued;,
                    ``(B) modified; or
                    ``(C) terminated.
            ``(5) Exception.--Paragraph (2) shall not apply to a State 
        regulatory authority (or any nonregulated electric utility 
        operating in the State) that demonstrates to the Secretary that 
        an energy efficiency resource program is in effect in the 
        State.''.
    (b) Gas Utilities.--Section 303 of the Public Utilities Regulatory 
Policy Act of 1978 (15 U.S.C. 3203) is amended by adding at the end the 
following:
    ``(e) Energy Efficiency Resource Programs.--
            ``(1) Definitions.--In this subsection:
                    ``(A) Demand baseline.--The term `demand baseline' 
                means the baseline determined by the Secretary for an 
                appropriate period preceding the implementation of an 
                energy efficiency resource program.
                    ``(B) Energy efficiency resource programs.--The 
                term `energy efficiency resource program' means an 
                energy efficiency or other demand reduction program 
                that is designed to reduce annual gas consumption or 
                peak demand of consumers served by a gas utility by a 
                percentage of the demand baseline of the utility that 
                is equal to not less than 0.75 percent of the number of 
                years during which the program is in effect.
            ``(2) Public hearings; determinations.--
                    ``(A) As soon as practicable after the date of 
                enactment of this subsection, but not later than 3 
                years after that date, each State regulatory authority 
                (with respect to each gas utility over which the State 
                has ratemaking authority) and each nonregulated gas 
                utility shall, after notice, conduct a public hearing 
                on the benefits and feasibility of implementing an 
                energy efficiency resource program.
                    ``(B) A State regulatory authority or nonregulated 
                utility shall implement an energy efficiency resource 
                program if, on the basis of a hearing under 
                subparagraph (A), the State regulatory authority or 
                nonregulated utility determines that the program 
                would--
                            ``(i) benefit end-use customers;
                            ``(ii) be cost-effective based on total 
                        resource cost;
                            ``(iii) serve the public welfare; and
                            ``(iv) be feasible to implement.
            ``(3) Implementation.--
                    ``(A) State regulatory authorities.--If a State 
                regulatory authority makes a determination under 
                paragraph (2)(B), the State regulatory authority 
                shall--
                            ``(i) require each gas utility over which 
                        the State has ratemaking authority to implement 
                        an energy efficiency resource program; and
                            ``(ii) allow such a utility to recover any 
                        expenditures incurred by the utility in 
                        implementing the energy efficiency resource 
                        program.
                    ``(B) Nonregulated gas utilities.--If a 
                nonregulated gas utility makes a determination under 
                paragraph (2)(B), the utility shall implement an energy 
                efficiency resource program.
            ``(4) Updating regulations.--A State regulatory authority 
        or nonregulated utility may update periodically a determination 
        under paragraph (2)(B) to determine whether an energy 
        efficiency resource program should be--
                    ``(A) continued;
                    ``(B) modified; or
                    ``(C) terminated.
            ``(5) Exception.--Paragraph (2) shall not apply to a State 
        regulatory authority (or any nonregulated gas utility operating 
        in the State) that demonstrates to the Secretary that an energy 
        efficiency resource program is in effect in the State.''.

                        TITLE V--TAX INCENTIVES

SEC. 500. AMENDMENT OF 1986 CODE.

    Except as otherwise expressly provided, whenever in this title 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.

             Subtitle A--Buildings and Equipment Incentives

SEC. 501. CREDIT FOR CONSTRUCTION OF NEW ENERGY EFFICIENT HOMES.

    (a) In General.--Subpart D of part IV of subchapter A of chapter 1 
(relating to business related credits) is amended by adding at the end 
the following new section:

``SEC. 45J. NEW ENERGY EFFICIENT HOME CREDIT.

    ``(a) In General.--For purposes of section 38, in the case of an 
eligible contractor with respect to a qualified new energy efficient 
home, the credit determined under this section for the taxable year 
with respect to such home is an amount equal to the aggregate adjusted 
bases of all energy efficient property installed in such home during 
construction of such home.
    ``(b) Limitations.--
            ``(1) Maximum credit.--
                    ``(A) In general.--The credit allowed by this 
                section with respect to a dwelling unit shall not 
                exceed--
                            ``(i) in the case of a dwelling unit 
                        described in clause (i) or (iii) of subsection 
                        (c)(3)(C), $1,000, and
                            ``(ii) in the case of a dwelling unit 
                        described in clause (ii) or (iv) of subsection 
                        (c)(3)(C), $2,000.
                    ``(B) Prior credit amounts on same dwelling unit 
                taken into account.--If a credit was allowed 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 such dwelling unit shall be reduced by the sum of 
                the credits allowed under subsection (a) with respect 
                to the dwelling unit for all prior taxable years.
            ``(2) Coordination with certain credits.--For purposes of 
        this section--
                    ``(A) the basis of any property referred to in 
                subsection (a) shall be reduced by that portion of the 
                basis of any property which is attributable to 
                qualified rehabilitation expenditures (as defined in 
                section 47(c)(2)) or to the energy percentage of energy 
                property (as determined under section 48(a)), and
                    ``(B) expenditures taken into account under section 
                47 or 48(a) shall not be taken into account under this 
                section.
    ``(c) Definitions.--For purposes of this section--
            ``(1) Eligible contractor.--The term `eligible contractor' 
        means--
                    ``(A) the person who constructed the qualified new 
                energy efficient home, or
                    ``(B) in the case of a qualified new energy 
                efficient home which is a manufactured home, the 
                manufactured home producer of such home.
        If more than 1 person is described in subparagraph (A) or (B) 
        with respect to any qualified new energy efficient home, such 
        term means the person designated as such by the owner of such 
        home.
            ``(2) Energy efficient property.--The term `energy 
        efficient property' means any energy efficient building 
        envelope component, and any energy efficient heating or cooling 
        equipment or system, which can, individually or in combination 
        with other components, result in a dwelling unit meeting the 
        requirements of this section.
            ``(3) Qualified new energy efficient home.--The term 
        `qualified new energy efficient home' means a dwelling unit--
                    ``(A) located in the United States,
                    ``(B) the construction of which is substantially 
                completed after the date of the enactment of this 
                section, and
                    ``(C) which is--
                            ``(i) certified to have a level of annual 
                        heating and cooling energy consumption which is 
                        at least 30 percent below the annual level of 
                        heating and cooling energy consumption of a 
                        comparable dwelling unit constructed in 
                        accordance with the standards of chapter 4 of 
                        the 2003 International Energy Conservation 
                        Code, as such Code (including supplements) is 
                        in effect on the date of the enactment of this 
                        section, and for which the heating and cooling 
                        equipment efficiencies correspond to the 
                        minimum allowed under the regulations 
                        established by the Department of Energy 
                        pursuant to the National Appliance Energy 
                        Conservation Act of 1987 and in effect at the 
                        time of construction, and to have building 
                        envelope component improvements account for at 
                        least \1/3\ of such 30 percent,
                            ``(ii) certified to have a level of annual 
                        heating and cooling energy consumption which is 
                        at least 50 percent below such annual level and 
                        to have building envelope component 
                        improvements account for at least \1/5\ of such 
                        50 percent,
                            ``(iii) a manufactured home which meets the 
                        requirements of clause (i) and which conforms 
                        to Federal Manufactured Home Construction and 
                        Safety Standards (section 3280 of title 24, 
                        Code of Federal Regulations), or
                            ``(iv) a manufactured home which meets the 
                        requirements of clause (ii) and which conforms 
                        to Federal Manufactured Home Construction and 
                        Safety Standards (section 3280 of title 24, 
                        Code of Federal Regulations).
            ``(4) Construction.--The term `construction' includes 
        substantial reconstruction and rehabilitation.
            ``(5) Acquire.--The term `acquire' includes purchase and, 
        in the case of reconstruction and rehabilitation, such term 
        includes a binding written contract for such reconstruction or 
        rehabilitation.
            ``(6) Building envelope component.--The term `building 
        envelope component' means--
                    ``(A) any sealant or 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--
                            ``(i) are specifically and primarily 
                        designed to reduce the heat gain of such 
                        dwelling unit, and
                            ``(ii) meet the Energy Star program 
                        requirements.
    ``(d) Certification.--
            ``(1) Method of certification.--A certification described 
        in subsection (c)(3)(C) shall be determined in accordance with 
        guidance prescribed by the Secretary, after consultation with 
        the Secretary of Energy. Such guidance shall specify procedures 
        and methods for calculating energy and cost savings.
            ``(2) Form.--A certification described in subsection 
        (c)(3)(C) shall be made in writing in a manner which specifies 
        in readily verifiable fashion the energy efficient building 
        envelope components and energy efficient heating or cooling 
        equipment installed and their respective rated energy 
        efficiency performance.
    ``(e) Basis Adjustment.--For purposes of this subtitle, if a credit 
is determined 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 determined.
    ``(f) Special Rule With Respect to Buildings With Energy Efficient 
Property.--In any case in which a deduction under section 200 or a 
credit under section 25C has been allowed with respect to property in 
connection with a dwelling unit, the level of annual heating and 
cooling energy consumption of the comparable dwelling unit referred to 
in clauses (i) and (ii) of subsection (c)(3)(C) shall be determined 
assuming such comparable dwelling unit contains the property for which 
such deduction or credit has been allowed.
    ``(g) Application of Section.--
            ``(1) 50 percent homes.--In the case of any dwelling unit 
        described in clause (ii) or (iv) of subsection (c)(3)(C), 
        subsection (a) shall apply to qualified new energy efficient 
        homes acquired during the period beginning on the date of the 
        enactment of this section, and ending on December 31, 2009.
            ``(2) 30 percent homes.--In the case of any dwelling unit 
        described in clause (i) or (iii) of subsection (c)(3)(C), 
        subsection (a) shall apply to qualified new energy efficient 
        homes acquired during the period beginning on the date of the 
        enactment of this section, and ending on December 31, 2007.''.
    (b) Credit Made Part of General Business Credit.--Section 38(b) 
(relating to current year business credit) 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 new paragraph:
            ``(20) the new energy efficient home credit determined 
        under section 45J(a).''.
    (c) Basis Adjustment.--Subsection (a) of section 1016, as amended 
by section 101, 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 45J(e), in the 
        case of amounts with respect to which a credit has been allowed 
        under section 45J.''.
    (d) Deduction for Certain Unused Business Credits.--Section 196(c) 
(defining qualified business credits) is amended by striking ``and'' at 
the end of paragraph (11), by striking the period at the end of 
paragraph (12) and inserting ``, and'', and by adding after paragraph 
(12) the following new paragraph:
            ``(13) the new energy efficient home credit determined 
        under section 45J(a).''.
    (e) Clerical Amendment.--The table of sections for subpart D of 
part IV of subchapter A of chapter 1 is amended by adding at the end 
the following new item:

``45J. New energy efficient home credit.''.
    (f) Effective Date.--The amendments made by this section shall 
apply to taxable years ending after the date of the enactment of this 
Act.

SEC. 502. CREDIT FOR ENERGY EFFICIENCY IMPROVEMENTS TO EXISTING HOMES.

    (a) Allowance of Credit.--
            (1) 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. ENERGY EFFICIENCY IMPROVEMENTS TO EXISTING HOMES.

    ``(a) Allowance of Credit.--
            ``(1) In general.--In the case of an individual, there 
        shall be allowed as a credit against the tax imposed by this 
        chapter for the taxable year an amount equal to so much of the 
        credit amount specified in paragraph (2) which does not exceed 
        the expenditures made by the taxpayer in connection with the 
        construction, reconstruction, erection, or rehabilitation of a 
        dwelling unit of the taxpayer which results in the unit being a 
        highly energy-efficient principal residence. Such expenditures 
        may include labor costs properly allocable to the onsite 
        preparation, assembly, or original installation of such 
        property.
            ``(2) Credit amount.--The credit amount with respect to a 
        highly energy-efficient principal residence is--
                    ``(A) $2,000 in the case of a percentage reduction 
                of 50 percent as determined under subsection (b)(1)(C), 
                and
                    ``(B) $4,000 times the percentage reduction in the 
                case of a percentage reduction of less than 50 percent 
                as determined under subsection (b)(1)(C).
    ``(b) Highly Energy-Efficient Principal Residence.--
            ``(1) In general.--Property is a highly energy-efficient 
        principal residence if--
                    ``(A) such property is located in the United 
                States,
                    ``(B) the property is used as a principal 
                residence, and
                    ``(C) the projected heating and cooling energy 
                usage of such property, measured in terms of average 
                annual energy cost to taxpayer, is reduced by a 
                percentage certified according to paragraph (3) in 
                comparison to the energy cost of such property if 
                expenditures made by the taxpayer with respect to 
                energy efficient improvements to such property were not 
                made.
            ``(2) Principal residence.--
                    ``(A) In general.--The term `principal residence' 
                has the same meaning as when used in section 121, 
                except that--
                            ``(i) no ownership requirement shall be 
                        imposed, and
                            ``(ii) the period for which a building is 
                        treated as used as a principal residence shall 
                        also include the 60-day period ending on the 
                        1st day on which it would (but for this 
                        paragraph) first be treated as used as a 
                        principal residence.
                    ``(B) Manufactured housing.--The term `residence' 
                shall include a dwelling unit which is a manufactured 
                home conforming to Federal Manufactured Home 
                Construction and Safety Standards (24 C.F.R. 3280).
            ``(3) Certification procedures.--
                    ``(A) In general.--For purposes of paragraph 
                (1)(C), energy usage shall be demonstrated by 
                performance-based compliance.
                    ``(B) Performance-based compliance.--Performance-
                based compliance shall be demonstrated if the percent 
                energy cost savings for heating and cooling is met with 
                respect to a dwelling unit when compared to the 
                original condition of the dwelling unit.
                    ``(C) Computer software.--Computer software shall 
                be used in support of performance-based compliance 
                under subparagraph (B) and such software shall meet all 
                of the procedures and methods for calculating energy 
                savings reductions which are promulgated by the 
                Secretary of Energy. Such regulations on the 
                specifications for software and verification protocols 
                shall be based on the 2005 California Residential 
                Alternative Calculation Method Approval Manual.
                    ``(D) Calculation requirements.--In calculating 
                tradeoffs and energy performance, the regulations shall 
                prescribe the costs per unit of energy and power, such 
                as kilowatt hour, kilowatt, gallon of fuel oil, and 
                cubic foot or Btu of natural gas, which may be 
                dependent on time of usage. If a State has developed 
                annual energy usage and cost calculation procedures 
                based on time of usage costs for use in the performance 
                standards of the State's building energy code before 
                the effective date of this section, the State may use 
                those annual energy usage and cost calculation 
                procedures in lieu of those adopted by the Secretary.
                    ``(E) Approval of software submissions.--The 
                Secretary shall approve software submissions which 
                comply with the calculation requirements of 
                subparagraph (C).
                    ``(F) Procedures for inspection and testing of 
                dwelling units.--The Secretary shall ensure that 
                procedures for the inspection and testing for 
                compliance comply with the calculation requirements 
                under subparagraph (C) and subsection (c)(2).
    ``(c) Special Rules.--For purposes of this section--
            ``(1) Determinations of compliance.--A determination of 
        compliance made for the purposes of this section shall be filed 
        with the Secretary within 1 year of the date of such 
        determination and shall include the TIN of the certifier, the 
        address of the building in compliance, and the identity of the 
        person for whom such determination was performed. 
        Determinations of compliance filed with the Secretary shall be 
        available for inspection by the Secretary of Energy.
            ``(2) Compliance.--
                    ``(A) In general.--The Secretary, after 
                consultation with the Secretary of Energy shall 
                establish requirements for certification and compliance 
                procedures after examining the requirements for energy 
                consultants and home energy ratings providers specified 
                by the Mortgage Industry National Home Energy Rating 
                Standards.
                    ``(B) Individuals qualified to determine 
                compliance.--The determination of compliance may be 
                provided by a local building regulatory authority, a 
                utility, a manufactured home production inspection 
                primary inspection agency (IPIA), a home inspector, or 
                an accredited home energy rating system provider. All 
                providers shall be accredited, or otherwise authorized 
                to use approved energy performance measurement methods, 
                by the Residential Energy Services Network (RESNET).
            ``(3) Dollar amounts in case of joint occupancy.--In the 
        case of any dwelling unit which if jointly occupied and used 
        during any calendar year as a principal 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.
            ``(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 his tenant-
        stockholder's proportionate share (as defined in section 
        216(b)(3)) of any expenditures of such corporation and such 
        credit shall be allocated pro rata to such individual.
            ``(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 he owns, such 
                individual shall be treated as having made his 
                proportionate share of any expenditures of such 
                association and any credit shall be allocated 
                appropriately.
                    ``(B) Condominium management association.--For 
                purposes of this paragraph, the term `condominium 
                management association' means an organization which 
                meets the requirements of paragraph (1) of section 
                528(c) (other than subparagraph (E) thereof) with 
                respect to a condominium project substantially all of 
                the units of which are used as principal residences.
            ``(6) Joint ownership of energy items.--
                    ``(A) In general.--Any expenditure otherwise 
                qualifying as an expenditure under this section shall 
                not be treated as failing to so qualify merely because 
                such expenditure was made with respect to 2 or more 
                dwelling units.
                    ``(B) Limits applied separately.--In the case of 
                any expenditure described in subparagraph (A), the 
                amount of the credit allowable under subsection (a) 
                shall (subject to paragraph (1)) be computed separately 
                with respect to the amount of the expenditure made for 
                each dwelling unit.
            ``(7) Allocation in certain cases.--If less than 80 percent 
        of the use of an item is for nonbusiness purposes, only that 
        portion of the expenditures for such item which is properly 
        allocable to use for nonbusiness purposes shall be taken into 
        account.
            ``(8) Coordination with other credits.--Property which 
        would, but for this paragraph, be eligible for credit under 
        more than one provision of this section shall be eligible only 
        under one such provision, the provision specified by the 
        taxpayer.
            ``(9) Year credit allowed.--The credit under subsection 
        (a)(2) shall be allowed in the taxable year in which the 
        percentage reduction with respect to the principal residence is 
        certified.
            ``(10) 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 of a structure, such expenditure shall be 
                treated as made when the original use of the 
                constructed structure by the taxpayer begins.
            ``(11) Property financed by subsidized energy financing.--
                    ``(A) Reduction of expenditures.--
                            ``(i) In general.--Except as provided in 
                        subparagraph (C), 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.
                            ``(ii) Subsidized energy financing.--For 
                        purposes of clause (i), the term `subsidized 
                        energy financing' has the same meaning given 
                        such term in section 48(a)(4)(C).
                    ``(B) Dollar limits reduced.--The dollar amounts in 
                the table contained in subsection (b)(3) with respect 
                to each property purchased for such dwelling unit for 
                any taxable year of such taxpayer shall be reduced 
                proportionately by an amount equal to the sum of--
                            ``(i) the amount of the expenditures made 
                        by the taxpayer during such taxable year with 
                        respect to such dwelling unit and 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 which is used to make 
                        residential energy property expenditures with 
                        respect to the dwelling unit and is not 
                        included in the gross income of such taxpayer.
                    ``(C) Exception for state programs.--Subparagraphs 
                (A) and (B) shall not apply to expenditures made with 
                respect to property for which the taxpayer has received 
                a loan, State tax credit, or grant under any State 
                energy program.
    ``(d) Basis Adjustments.--For purposes of this subtitle, if a 
credit is allowed under this section for any expenditure with respect 
to any property, the increase in the basis of such property which would 
(but for this subsection) result from such expenditure shall be reduced 
by the amount of the credit so allowed.
    ``(e) Regulations.--The Secretary shall promulgate such regulations 
as necessary to take into account new technologies regarding energy 
efficiency and renewable energy for purposes of determining energy 
efficiency and savings under this section.
    ``(f) Termination.--This section shall not apply with respect to 
any energy property placed in service after December 31, 2009.''.
            (2) Conforming amendments.--
                    (A) Subsection (a) of section 1016, as amended by 
                section 601, 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 new paragraph:
            ``(33) to the extent provided in section 25C(d), in the 
        case of amounts with respect to which a credit has been allowed 
        under section 25C.''.
                    (B) 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:

``25C. Nonbusiness energy property.''.
            (3) Effective dates.--The amendments made by this 
        subsection shall apply to expenditures made after December 31, 
        2005.
    (b) Temporary Credit for Energy Efficiency Improvements to Existing 
Homes.--
            (1) Subpart A of part IV of subchapter A of chapter 1 
        (relating to nonrefundable personal credits), as amended by 
        this Act, 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) Limitation.--The credit allowed by this section with respect 
to a dwelling for any taxable year shall not exceed $300, reduced (but 
not below zero) by the sum of--
            ``(1) the credits allowed under subsection (a) to the 
        taxpayer with respect to the dwelling for all preceding taxable 
        years, and
            ``(2) the credits allowed under section 25C to the taxpayer 
        with respect to the dwelling for such taxable year and all 
        preceding taxable years.
    ``(c) Carryforward of Unused Credit.--If the credit allowable under 
subsection (a) exceeds the limitation imposed by section 26(a) for such 
taxable year reduced by the sum of the credits allowable under this 
subpart (other than this section) 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 succeeding taxable year.
    ``(d) Qualified Energy Efficiency Improvements.--For purposes of 
this section, the term `qualified energy efficiency improvements' means 
any energy efficient building envelope component which is certified to 
meet or exceed the latest prescriptive criteria for such component in 
the 2003 International Energy Conservation Code (with supplements) as 
in effect on the date of the enactment of this subsection, if--
            ``(1) such component is installed in or on a dwelling 
        which--
                    ``(A) is located in the United States,
                    ``(B) has not been treated as a qualified new 
                energy efficient home for purposes of any credit 
                allowed under section 45J, and
                    ``(C) is 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.
    ``(e) Certification.--
            ``(1) Method of certification.--The certification described 
        in subsection (d) for any component described in such 
        subsection shall be determined on the basis of applicable 
        energy efficiency ratings (including product labeling 
        requirements) for affected building envelope components.
            ``(2) Provider.--A certification described in subsection 
        (d) shall be provided by a third party, such as a local 
        building regulatory authority, a utility, a manufactured home 
        primary inspection agency, or a home energy rating 
        organization.
            ``(3) Form.--A certification described in subsection (d) 
        shall be made in writing on forms which specify in readily 
        inspectable fashion the energy efficient components and their 
        respective efficiency ratings, and which include a permanent 
        label affixed to the electrical distribution panel of the 
        dwelling.
    ``(f) Definitions and 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 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 for the 
                qualified energy efficiency improvements made during 
                such calendar year by any of such individuals with 
                respect to such dwelling unit shall be determined by 
                treating all of such individuals as 1 taxpayer whose 
                taxable year is such calendar year.
                    ``(B) There shall be allowable, with respect to 
                such expenditures to each of such individuals, a credit 
                under subsection (a) for the taxable year in which such 
                calendar year ends in an amount which bears the same 
                ratio to the amount determined under subparagraph (A) 
                as the amount of such expenditures made by such 
                individual during such calendar year bears to the 
                aggregate of such expenditures made by all of such 
                individuals during such calendar year.
            ``(2) Tenant-stockholder in cooperative housing 
        corporation.--In the case of an individual who is a tenant-
        stockholder (as defined in section 216) in a cooperative 
        housing corporation (as defined in such section), such 
        individual shall be treated as having paid his tenant-
        stockholder's proportionate share (as defined in section 
        216(b)(3)) of the cost of qualified energy efficiency 
        improvements made by 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 the individual 
                owns, such individual shall be treated as having paid 
                the individual's proportionate share of the cost of 
                qualified energy efficiency improvements made by such 
                association.
                    ``(B) Condominium management association.--For 
                purposes of this paragraph, the term `condominium 
                management association' means an organization which 
                meets the requirements of paragraph (1) of section 
                528(c) (other than subparagraph (E) thereof) with 
                respect to a condominium project substantially all of 
                the units of which are used as residences.
            ``(4) Building envelope component.--The term `building 
        envelope component' means--
                    ``(A) any sealant or insulation material or system 
                which is specifically and primarily designed to reduce 
                the heat loss or gain or a dwelling when installed in 
                or on such dwelling,
                    ``(B) exterior windows (including skylights), and
                    ``(C) exterior doors.
            ``(5) Manufactured homes included.--For purposes of this 
        section, the term `dwelling' includes a manufactured home which 
        conforms to Federal Manufactured Home Construction and Safety 
        Standards (24 C.F.R. 3280).
    ``(g) 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.
    ``(h) Termination.--Subsection (a) shall not apply to qualified 
energy efficiency improvements installed after December 31, 2006.''.
            (2) Conforming amendments.--
                    (A) Section 1016(a), as amended by 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(g), in the 
        case of amounts with respect to which a credit has been allowed 
        under section 25D.''.
                    (B) The table of sections for subpart A of part IV 
                of subchapter A of chapter 1, as amended by this Act, 
                is amended by inserting after the item relating to 
                section 25C the following new item:

``25D. Energy efficiency improvements to existing homes.''.
            (3) Effective dates.--
                    (A) In general.--Except as provided by subparagraph 
                (B), the amendments made by this subsection shall apply 
                to property installed after December 31, 2005, in 
                taxable years ending after such date.
                    (B) Paragraph (2).--The amendments made by 
                paragraph (2) shall apply to taxable years ending after 
                December 31, 2005.

SEC. 503. ENERGY EFFICIENT COMMERCIAL BUILDINGS DEDUCTION.

    (a) In General.--Part VI of subchapter B of chapter 1 (relating to 
itemized deductions for individuals and corporations) is amended by 
inserting after section 179B the following new section:

``SEC. 179C. ENERGY EFFICIENT COMMERCIAL BUILDINGS DEDUCTION.

    ``(a) In General.--There shall be allowed as a deduction an amount 
equal to the cost of energy efficient commercial building property 
placed in service during the taxable year.
    ``(b) Maximum Amount of Deduction.--The deduction under subsection 
(a) with respect to any building for the taxable year and all prior 
taxable years shall not exceed an amount equal to the product of--
            ``(1) $2.25, and
            ``(2) the square footage of the building.
    ``(c) Definitions.--For purposes of this section--
            ``(1) Energy efficient commercial building property.--The 
        term `energy efficient commercial building property' means 
        property--
                    ``(A) which is installed on or in any building 
                located in the United States,
                    ``(B) which is installed as part of--
                            ``(i) the interior lighting systems,
                            ``(ii) the heating, cooling, ventilation, 
                        and hot water systems, or
                            ``(iii) the building envelope, and
                    ``(C) which is certified in accordance with 
                subsection (d)(6) as being installed as part of a plan 
                designed to reduce the total annual energy and power 
                costs with respect to the interior lighting systems, 
                heating, cooling, ventilation, and hot water systems of 
                the building by 50 percent or more in comparison to a 
                reference building which meets the minimum requirements 
                of Standard 90.1-2001 using methods of calculation 
                under subsection (d)(2).
        A building described in subparagraph (A) may include any 
        residential rental property, including any low-rise multifamily 
        structure or single family housing property which is not within 
        the scope of Standard 90.1-2001, but shall not include any 
        qualified new energy efficient home (within the meaning of 
        section 45J(d)(3)) for which a credit under section 45J has 
        been allowed.
            ``(2) Standard 90.1-2001.--The term `Standard 90.1-2001' 
        means Standard 90.1-2001 of the American Society of Heating, 
        Refrigerating, and Air Conditioning Engineers and the 
        Illuminating Engineering Society of North America (as in effect 
        on April 2, 2003).
    ``(d) Special Rules.--
            ``(1) Partial allowance.--
                    ``(A) In general.--Except as provided in subsection 
                (f), if--
                            ``(i) the requirement of subsection 
                        (c)(1)(C) is not met, but
                            ``(ii) there is a certification in 
                        accordance with paragraph (6) that any system 
                        referred to in subsection (c)(1)(B) satisfies 
                        the energy-savings targets established by the 
                        Secretary under subparagraph (B) with respect 
                        to such system, then the requirement of 
                        subsection (c)(1)(C) shall be treated as met 
                        with respect to such system, and the deduction 
                        under subsection (a) shall be allowed with 
                        respect to energy efficient commercial building 
                        property installed as part of such system and 
                        as part of a plan to meet such targets, except 
                        that subsection (b) shall be applied to such 
                        property by substituting `$.75' for `$2.25'.
                    ``(B) Regulations.--The Secretary, after 
                consultation with the Secretary of Energy, shall 
                establish a target for each system described in 
                subsection (c)(1)(B) which, if such targets were met 
                for all such systems, the building would meet the 
                requirements of subsection (c)(1)(C).
            ``(2) Methods of calculation.--The Secretary, after 
        consultation with the Secretary of Energy, shall promulgate 
        regulations which describe in detail methods for calculating 
        and verifying energy and power consumption and cost, based on 
        the provisions of the 2005 California Nonresidential 
        Alternative Calculation Method Approval Manual or, in the case 
        of residential property, the 2005 California Residential 
        Alternative Calculation Method Approval Manual. These 
        regulations shall meet the following requirements:
                    ``(A) In calculating tradeoffs and energy 
                performance, the regulations shall prescribe the costs 
                per unit of energy and power, such as kilowatt hour, 
                kilowatt, gallon of fuel oil, and cubic foot or Btu of 
                natural gas, which may be dependent on time of usage. 
                If a State has developed annual energy usage and cost 
                calculation procedures based on time of usage costs for 
                use in the performance standards of the State's 
                building energy code before the effective date of this 
                section, the State may use those annual energy usage 
                and cost calculation procedures in lieu of those 
                adopted by the Secretary.
                    ``(B) The calculation methods under this paragraph 
                need not comply fully with section 11 of Standard 90.1-
                2001.
                    ``(C) The calculation methods shall be fuel 
                neutral, such that the same energy efficiency features 
                shall qualify a building for the deduction under this 
                section regardless of whether the heating source is a 
                gas or oil furnace or an electric heat pump. The 
                reference building for a proposed design which employs 
                electric resistance heating shall be modeled as using a 
                heat pump.
                    ``(D) The calculation methods shall provide 
                appropriate calculated energy savings for design 
                methods and technologies not otherwise credited in 
                either Standard 90.1-2001 or in the 2005 California 
                Nonresidential Alternative Calculation Method Approval 
                Manual, including the following:
                            ``(i) Natural ventilation.
                            ``(ii) Evaporative cooling.
                            ``(iii) Automatic lighting controls such as 
                        occupancy sensors, photocells, and timeclocks.
                            ``(iv) Daylighting.
                            ``(v) Designs utilizing semi-conditioned 
                        spaces which maintain adequate comfort 
                        conditions without air conditioning or without 
                        heating.
                            ``(vi) Improved fan system efficiency, 
                        including reductions in static pressure.
                            ``(vii) Advanced unloading mechanisms for 
                        mechanical cooling, such as multiple or 
                        variable speed compressors.
                            ``(viii) The calculation methods may take 
                        into account the extent of commissioning in the 
                        building, and allow the taxpayer to take into 
                        account measured performance which exceeds 
                        typical performance.
                            ``(ix) On-site generation of electricity, 
                        including combined heat and power systems, fuel 
                        cells, and renewable energy generation such as 
                        solar energy.
                            ``(x) Wiring with lower energy losses than 
                        wiring satisfying Standard 90.1-2001 
                        requirements for building power distribution 
                        systems.
            ``(3) Computer software.--
                    ``(A) In general.--Any calculation under paragraph 
                (2) shall be prepared by qualified computer software.
                    ``(B) Qualified computer software.--For purposes of 
                this paragraph, the term `qualified computer software' 
                means software--
                            ``(i) for which the software designer has 
                        certified that the software meets all 
                        procedures and detailed methods for calculating 
                        energy and power consumption and costs as 
                        required by the Secretary,
                            ``(ii) which provides such forms as 
                        required to be filed by the Secretary in 
                        connection with energy efficiency of property 
                        and the deduction allowed under this section, 
                        and
                            ``(iii) which provides a notice form which 
                        documents the energy efficiency features of the 
                        building and its projected annual energy costs.
            ``(4) Allocation of deduction for public property.--In the 
        case of energy efficient commercial building property installed 
        on or in public property, the Secretary shall promulgate a 
        regulation to allow the allocation of the deduction to the 
        person primarily responsible for designing the property in lieu 
        of the public entity which is the owner of such property. Such 
        person shall be treated as the taxpayer for purposes of this 
        section.
            ``(5) Notice to owner.--Each certification required under 
        this section shall include an explanation to the building owner 
        regarding the energy efficiency features of the building and 
        its projected annual energy costs as provided in the notice 
        under paragraph (3)(B)(iii).
            ``(6) Certification.--
                    ``(A) In general.--The Secretary shall prescribe 
                the manner and method for the making of certifications 
                under this section.
                    ``(B) Procedures.--The Secretary shall include as 
                part of the certification process procedures for 
                inspection and testing by qualified individuals 
                described in subparagraph (C) to ensure compliance of 
                buildings with energy-savings plans and targets. Such 
                procedures shall be comparable, given the difference 
                between commercial and residential buildings, to the 
                requirements in the Mortgage Industry National 
                Accreditation Procedures for Home Energy Rating 
                Systems.
                    ``(C) Qualified individuals.--Individuals qualified 
                to determine compliance shall be only those individuals 
                who are recognized by an organization certified by the 
                Secretary for such purposes.
    ``(e) Basis Reduction.--For purposes of this subtitle, if a 
deduction is allowed under this section with respect to any energy 
efficient commercial building property, the basis of such property 
shall be reduced by the amount of the deduction so allowed.
    ``(f) Interim Rules for Lighting Systems.--Until such time as the 
Secretary issues final regulations under subsection (d)(1)(B) with 
respect to property which is part of a lighting system--
            ``(1) In general.--The lighting system target under 
        subsection (d)(1)(A)(ii) shall be a reduction in lighting power 
        density of 25 percent (50 percent in the case of a warehouse) 
        of the minimum requirements in Table 9.3.1.1 or Table 9.3.1.2 
        (not including additional interior lighting power allowances) 
        of Standard 90.1-2001.
            ``(2) Reduction in deduction if reduction less than 40 
        percent.--
                    ``(A) In general.--If, with respect to the lighting 
                system of any building other than a warehouse, the 
                reduction in lighting power density of the lighting 
                system is not at least 40 percent, only the applicable 
                percentage of the amount of deduction otherwise 
                allowable under this section with respect to such 
                property shall be allowed.
                    ``(B) Applicable percentage.--For purposes of 
                subparagraph (A), the applicable percentage is the 
                number of percentage points (not greater than 100) 
                equal to the sum of--
                            ``(i) 50, and
                            ``(ii) the amount which bears the same 
                        ratio to 50 as the excess of the reduction of 
                        lighting power density of the lighting system 
                        over 25 percentage points bears to 15.
                    ``(C) Exceptions.--This subsection shall not apply 
                to any system--
                            ``(i) the controls and circuiting of which 
                        do not comply fully with the mandatory and 
                        prescriptive requirements of Standard 90.1-2001 
                        and which do not include provision for bilevel 
                        switching in all occupancies except hotel and 
                        motel guest rooms, store rooms, restrooms, and 
                        public lobbies, or
                            ``(ii) which does not meet the minimum 
                        requirements for calculated lighting levels as 
                        set forth in the Illuminating Engineering 
                        Society of North America Lighting Handbook, 
                        Performance and Application, Ninth Edition, 
                        2000.
    ``(g) Coordination With Other Tax Benefits.--
            ``(1) No double benefit.--No deduction shall be allowed 
        under subsection (a) with respect to any building for which a 
        credit under section 45J has been allowed.
            ``(2) Special rule with respect to buildings with energy 
        efficient property.--In any case in which a deduction under 
        section 200 or a credit under section 25C has been allowed with 
        respect to property in connection with a building, the annual 
        energy and power costs of the reference building referred to in 
        subsection (c)(1)(C) shall be determined assuming such 
        reference building contains the property for which such 
        deduction or credit has been allowed.
    ``(h) Regulations.--The Secretary shall promulgate such regulations 
as necessary--
            ``(1) to take into account new technologies regarding 
        energy efficiency and renewable energy for purposes of 
        determining energy efficiency and savings under this section, 
        and
            ``(2) to provide for a recapture of the deduction allowed 
        under this section if the plan described in subsection 
        (c)(1)(C) or (d)(1)(A) is not fully implemented.
    ``(i) Termination.--This section shall not apply with respect to 
property placed in service after December 31, 2010.''.
    (b) Conforming Amendments.--
            (1) Section 1016(a) is amended by striking ``and'' at the 
        end of paragraph (33), by striking the period at the end of 
        paragraph (34) and inserting ``, and'', and by adding at the 
        end the following new paragraph:
            ``(35) to the extent provided in section 179C(e).''.
            (2) Section 1245(a) is amended by inserting ``179C,'' after 
        ``179B,'' both places it appears in paragraphs (2)(C) and 
        (3)(C).
            (3) Section 1250(b)(3) is amended by inserting before the 
        period at the end of the first sentence ``or by section 179C''.
            (4) Section 263(a)(1) of such Code is amended by striking 
        ``or'' at the end of subparagraph (H), by striking the period 
        at the end of subparagraph (I) and inserting ``, or'', and by 
        inserting after subparagraph (I) the following new 
        subparagraph:
                    ``(J) expenditures for which a deduction is allowed 
                under section 179C.''.
            (5) Section 312(k)(3)(B) is amended by striking ``section 
        179, 179A, or 179B'' each place it appears in the heading and 
        text and inserting ``section 179, 179A, 179B, or 179C''.
    (c) Clerical Amendment.--The table of sections for part VI of 
subchapter B of chapter 1 is amended by inserting after section 179B 
the following new item:

``179C. Energy efficient commercial buildings deduction.''.
    (d) 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. 504. 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 25D the following new section:

``SEC. 25E. 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 the qualified Tier 1 
and Tier 2 energy efficient building property expenditures made by the 
taxpayer during such year.
    ``(b) Limitations.--
            ``(1) Maximum credit.--The credit allowed under subsection 
        (a) shall not exceed--
                    ``(A) $300 for each Tier 2 electric heat pump water 
                heater,
                    ``(B) $300 for each Tier 2 natural gas, oil or 
                propane furnace or hot water boiler installed in 2006 
                ($250 for equipment installed in 2007, $200 for 
                equipment installed in 2008),
                    ``(C) $200 for each Tier 1 natural gas, oil, or 
                propane furnace, or hot water boiler installed in 2006 
                ($150 for equipment installed in 2007, $100 for 
                equipment installed in 2008),
                    ``(D) $300 for each Tier 2 natural gas, oil, or 
                propane water heater,
                    ``(E) $50 for each Tier 1 natural gas, oil, or 
                propane water heater,
                    ``(F) $50 for a Tier 1advanced main air circulating 
                fan which is installed in a furnace with an Annual Fuel 
                Utilization Efficiency of less than 92 percent,
                    ``(G) $300 for each Tier 2 combination space and 
                water heating system,
                    ``(H) $50 for each Tier 1combination space and 
                water heating system,
                    ``(I) $250 for each Tier 2 geothermal heat pump,
                    ``(J) $300 for each Tier 2 central air conditioner 
                or central heat pump ($200 for equipment installed in 
                2008), and
                    ``(K) $200 for each Tier 1central air conditioner 
                or central heat pump ($100 for equipment installed in 
                2008).
            ``(2) Safety certifications.--No credit shall be allowed 
        under this section for an item of property unless such property 
        meets the performance and quality standards, and the 
        certification requirements (if any), which--
                    ``(A) have been prescribed by the Secretary by 
                regulations (after consultation with the Secretary of 
                Energy or the Administrator of the Environmental 
                Protection Agency, as appropriate),
                    ``(B) in the case of the energy efficiency ratio 
                (EER) for property described in subsection 
                (d)(6)(B)(i), (J) and (K)--
                            ``(i) require measurements to be based on 
                        published data which is tested by manufacturers 
                        at 95 degrees Fahrenheit,
                            ``(ii) do not require ratings to be based 
                        on certified data of the Air Conditioning and 
                        Refrigeration Institute, and
                            ``(iii) are in effect at the time of the 
                        acquisition of the property.
    ``(c) Carryforward of Unused Credit.--If the credit allowable under 
subsection (a) exceeds the limitation imposed by section 26(a) for such 
taxable year reduced by the sum of the credits allowable under this 
subpart (other than this section and section 25D), such excess shall be 
carried to the succeeding taxable year and added to the credit 
allowable under subsection (a) for such succeeding taxable year.
    ``(d) Definitions.--For purposes of this section--
            ``(1) Qualified energy efficient building property 
        expenditure.--The term `qualified energy efficient building 
        property expenditure' means an expenditure for any Tier 2 or 
        Tier 1 energy efficient building property.
            ``(2) Tier 2 energy efficient building property.--The term 
        `Tier 2 energy efficient building property' means--
                    ``(A) an electric heat pump water heater which 
                yields an energy factor of at least 1.7 in the standard 
                Department of Energy test procedure,
                    ``(B) a natural gas, oil, propane furnace, or hot 
                water boiler which achieves at least 95 percent annual 
                fuel utilization efficiency (AFUE) and which has an 
                advanced main air circulating fan,
                    ``(C) a natural gas, oil, or propane water heater 
                (including a tankless water heater) which has an energy 
                factor of at least 0.80 in the standard Department of 
                Energy test procedure,
                    ``(D) a combination space and water heating system 
                which has a combined energy factor of at least 0.80 and 
                a combined annual fuel utilization efficiency (AFUE) of 
                at least 78 percent in the standard Department of 
                Energy test procedure,
                    ``(E) a geothermal heat pump which has water 
                heating capability by a desuperheater or full-
                condensing option and which has an energy efficiency 
                ratio (EER) of at least 18 for ground-loop systems, at 
                least 21 for ground-water systems, and at least 17 for 
                direct GeoExchange systems; and
                    ``(F) a central air conditioner or central heat 
                pump which meets--
                            ``(i) the highest efficiency tier 
                        established by the Consortium for Energy 
                        Efficiency as in effect on Jan. 1, 2006; and
                            ``(ii) for units installed after December 
                        31, 2006, the Energy Star installation 
                        specifications that take effect in 2007, as set 
                        by the Environmental Protection Agency.
            ``(3) Tier 1 energy efficient building property.--The term 
        `Tier 1 energy efficient building property' means--
                    ``(A) a natural gas, oil, propane furnace, or hot 
                water boiler which achieves at least 92 percent annual 
                fuel utilization efficiency (AFUE) and which has an 
                advanced main air circulating fan,
                    ``(B) a natural gas, oil, or propane water heater 
                (including a tankless water heater) which has an energy 
                factor of at least 0.65 but less than 0.80 in the 
                standard Department of Energy test procedure,
                    ``(C) an advanced main air circulating fan which 
                has an annual electricity use of no more than 2 percent 
                of the total annual energy use (as determined in the 
                standard Department of Energy test procedures) and 
                which is used in a new natural gas, propane, or oil-
                fired furnace,
                    ``(D) a combination space and water heating system 
                which has a combined energy factor of at least 0.65 but 
                less than 0.80 and a combined annual fuel utilization 
                efficiency (AFUE) of at least 78 percent in the 
                standard Department of Energy test procedure,
                    ``(E) a central air conditioner or central heat 
                pump which meets the Energy Star specifications set by 
                the Environmental Protection Agency as follows--
                            ``(i) equipment specifications that take 
                        effect in 2006 (including for units installed 
                        before the specifications take effect); and
                            ``(ii) for units installed after December 
                        31, 2006, installation specifications that take 
                        effect in 2007.
            ``(4) Labor costs.--Expenditures for labor costs properly 
        allocable to the onsite preparation, assembly, or original 
        installation of the property and for piping or wiring to 
        interconnect such property to the dwelling unit shall be taken 
        into account for purposes of this section.
    ``(e) 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 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 (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 1 
                taxpayer whose taxable year is such calendar year.
                    ``(B) There shall be allowable, with respect to 
                such expenditures to each of such individuals, a credit 
                under subsection (a) for the taxable year in which such 
                calendar year ends in an amount which bears the same 
                ratio to the amount determined under subparagraph (A) 
                as the amount of such expenditures made by such 
                individual during such calendar year bears to the 
                aggregate of such expenditures made by all of such 
                individuals during such calendar year.
            ``(2) Tenant-stockholder in cooperative housing 
        corporation.--In the case of an individual who is a tenant-
        stockholder (as defined in section 216) in a cooperative 
        housing corporation (as defined in such section), such 
        individual shall be treated as having made his tenant-
        stockholder's proportionate share (as defined in section 
        216(b)(3)) of any expenditures of such corporation.
            ``(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 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.
            ``(4) Allocation in certain cases.--Except in the case of 
        qualified wind energy property expenditures, 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.
            ``(5) 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.
            ``(6) 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)(5)(C)).
    ``(f) 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.
    ``(g) Termination.--The credit allowed under this section shall not 
apply to expenditures after December 31, 2008.''.
    (b) Conforming Amendments.--
            (1) Section 1016(a), as amended by this Act, is amended by 
        striking ``and'' at the end of paragraph (34), by striking the 
        period at the end of paragraph (35) and inserting ``, and'', 
        and by adding at the end the following new paragraph:
            ``(36) to the extent provided in section 25E(f), in the 
        case of amounts with respect to which a credit has been allowed 
        under section 25E.''.
            (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 25D the following new item:

``25E. Residential energy efficient property.''.
    (c) Effective Dates.--
            (1) In general.--Except as provided by paragraph (2), the 
        amendments made by this section shall apply to expenditures 
        after December 31, 2005, in taxable years ending after such 
        date.
            (2) Subsection (b).--The amendments made by subsection (b) 
        shall apply to taxable years beginning after December 31, 2005.

SEC. 505. CREDIT FOR ENERGY EFFICIENT APPLIANCES.

    (a) In General.--Subpart D of part IV of subchapter A of chapter 1 
(relating to business-related credits) is amended by adding at the end 
the following new section:

``SEC. 45K. ENERGY EFFICIENT APPLIANCE CREDIT.

    ``(a) General Rule.--
            ``(1) In general.--For purposes of section 38, the energy 
        efficient appliance credit determined under this section for 
        any taxable year is an amount equal to the sum of the credit 
        amounts determined under paragraph (2) for each type of 
        qualified energy efficient appliance produced by the taxpayer 
        during the calendar year ending with or within the taxable 
        year.
            ``(2) Credit amounts.--The credit amount determined for any 
        type of qualified energy efficient appliance is--
                    ``(A) the applicable amount determined under 
                subsection (b) with respect to such type, multiplied by
                    ``(B) the eligible production for such type.
    ``(b) Applicable Amount.--
            ``(1) In general.--For purposes of subsection (a)--
                    ``(A) Dishwashers.--The applicable amount is the 
                energy savings amount in the case of a dishwasher 
                which--
                            ``(i) is manufactured in calendar year 2006 
                        or 2007, and
                            ``(ii) meets the requirements of the Energy 
                        Star program which are in effect for 
                        dishwashers in 2007.
                    ``(B) Clothes washers.--The applicable amount is--
                            ``(i) $50, in the case of a clothes washer 
                        which--
                                    ``(I) is manufactured in calendar 
                                year 2005, and
                                    ``(II) has an MEF of at least 1.42,
                            ``(ii) $100, in the case of a clothes 
                        washer which--
                                    ``(I) is manufactured in calendar 
                                year 2005, 2006, or 2007, and
                                    ``(II) meets the requirements of 
                                the Energy Star program which are in 
                                effect for clothes washers in 2007, and
                            ``(iii) the energy and water savings 
                        amount, in the case of a clothes washer which--
                                    ``(I) is manufactured in calendar 
                                year 2008, 2009, or 2010, and
                                    ``(II) meets the requirements of 
                                the Energy Star program which are in 
                                effect for clothes washers in 2010.
                    ``(C) Refrigerators.--
                            ``(i) 15 percent savings.--The applicable 
                        amount is $75 in the case of a refrigerator 
                        which--
                                    ``(I) is manufactured in calendar 
                                year 2005 or 2006, and
                                    ``(II) consumes at least 15 percent 
                                but not more than 20 percent less 
                                kilowatt hours per year than the 2001 
                                energy conservation standard.
                            ``(ii) 20 percent savings.--In the case of 
                        a refrigerator which consumes at least 20 
                        percent but not more than 25 percent less 
                        kilowatt hours per year than the 2001 energy 
                        conservation standards, the applicable amount 
                        is--
                                    ``(I) $125 for a refrigerator which 
                                is manufactured in calendar year 2005, 
                                2006, or 2007, and
                                    ``(II) $100 for a refrigerator 
                                which is manufactured in calendar year 
                                2008.
                            ``(iii) 25 percent savings.--In the case of 
                        a refrigerator which consumes at least 25 
                        percent less kilowatt hours per year than the 
                        2001 energy conservation standards, the 
                        applicable amount is--
                                    ``(I) $175 for a refrigerator which 
                                is manufactured in calendar year 2005, 
                                2006, or 2007, and
                                    ``(II) $150 for a refrigerator 
                                which is manufactured in calendar year 
                                2008, 2009, or 2010.
            ``(2) Energy savings amount.--For purposes of paragraph 
        (1)(A)--
                    ``(A) In general.--The energy savings amount is the 
                lesser of--
                            ``(i) the product of--
                                    ``(I) $3, and
                                    ``(II) 100 multiplied by the energy 
                                savings percentage, or
                            ``(ii) $100.
                    ``(B) Energy savings percentage.--For purposes of 
                subparagraph (A), the energy savings percentage is the 
                ratio of--
                            ``(i) the EF required by the Energy Star 
                        program for dishwashers in 2007 minus the EF 
                        required by the Energy Star program for 
                        dishwashers in 2005, to
                            ``(ii) the EF required by the Energy Star 
                        program for dishwashers in 2007.
            ``(3) Energy and water savings amount.--For purposes of 
        paragraph (1)(B)(iii)--
                    ``(A) In general.--The energy and water savings 
                amount is the lesser of--
                            ``(i) the product of--
                                    ``(I) $10, and
                                    ``(II) 100 multiplied by the energy 
                                and water savings percentage, or
                            ``(ii) $200.
                    ``(B) Energy and water savings percentage.--For 
                purposes of subparagraph (A), the energy and water 
                savings percentage is the average of the MEF savings 
                percentage and the WF savings percentage.
                    ``(C) MEF savings percentage.--For purposes of this 
                paragraph, the MEF savings percentage is the ratio of--
                            ``(i) the MEF required by the Energy Star 
                        program for clothes washers in 2010 minus the 
                        MEF required by the Energy Star program for 
                        clothes washers in 2007, to
                            ``(ii) the MEF required by the Energy Star 
                        program for clothes washers in 2010.
                    ``(D) WF savings percentage.--For purposes of this 
                paragraph, the WF savings percentage is the ratio of--
                            ``(i) the WF required by the Energy Star 
                        program for clothes washers in 2007 minus the 
                        WF required by the Energy Star program for 
                        clothes washers in 2010, to
                            ``(ii) the WF required by the Energy Star 
                        program for clothes washers in 2007.
    ``(c) Eligible Production.--
            ``(1) In general.--Except as provided in paragraphs (2) and 
        (3), the eligible production in a calendar year with respect to 
        each type of energy efficient appliance is the excess of--
                    ``(A) the number of appliances of such type which 
                are produced by the taxpayer in the United States 
                during such calendar year, over
                    ``(B) the average number of appliances of such type 
                which were produced by the taxpayer (or any 
                predecessor) in the United States during the preceding 
                3-calendar year period.
            ``(2) Special rule for refrigerators.--The eligible 
        production in a calendar year with respect to each type of 
        refrigerator described in subsection (b)(1)(C) is the excess 
        of--
                    ``(A) the number of appliances of such type which 
                are produced by the taxpayer in the United States 
                during such calendar year, over
                    ``(B) 110 percent of the average number of 
                appliances of such type which were produced by the 
                taxpayer (or any predecessor) in the United States 
                during the preceding 3-calendar year period.
            ``(3) Special rule for 2005 production.--For purposes of 
        determining eligible production for calendar year 2005--
                    ``(A) only production after the date of enactment 
                of this section shall be taken into account under 
                paragraphs (1)(A) and (2)(A), and
                    ``(B) the amount taken into account under 
                paragraphs (1)(B) and (2)(B) shall be an amount which 
                bears the same ratio to the amount which would (but for 
                this paragraph) be taken into account under such 
                paragraph as--
                            ``(i) the number of days in calendar year 
                        2005 after the date of enactment of this 
                        section, bears to
                            ``(ii) 365.
    ``(d) Types of Energy Efficient Appliance.--For purposes of this 
section, the types of energy efficient appliances are--
            ``(1) dishwashers described in subsection (b)(1)(A),
            ``(2) clothes washers described in subsection (b)(1)(B)(i),
            ``(3) clothes washers described in subsection 
        (b)(1)(B)(ii),
            ``(4) clothes washers described in subsection 
        (b)(1)(B)(iii),
            ``(5) refrigerators described in subsection (b)(1)(C)(i),
            ``(6) refrigerators described in subsection 
        (b)(1)(C)(ii)(I),
            ``(7) refrigerators described in subsection 
        (b)(1)(C)(ii)(II),
            ``(8) refrigerators described in subsection 
        (b)(1)(C)(iii)(I), and
            ``(9) refrigerators described in subsection 
        (b)(1)(C)(iii)(II).
    ``(e) Limitations.--
            ``(1) Aggregate credit amount allowed.--The aggregate 
        amount of credit allowed under subsection (a) with respect to a 
        taxpayer for any taxable year shall not exceed $75,000,000 
        reduced by the amount of the credit allowed under subsection 
        (a) to the taxpayer (or any predecessor) for all prior taxable 
        years.
            ``(2) Amount allowed for certain appliances.--
                    ``(A) In general.--In the case of appliances 
                described in subparagraph (C), the aggregate amount of 
                the credit allowed under subsection (a) with respect to 
                a taxpayer for any taxable year shall not exceed 
                $20,000,000 reduced by the amount of the credit allowed 
                under subsection (a) to the taxpayer (or any 
                predecessor) for all prior taxable years with respect 
                to such appliances.
                    ``(B) Election to increase allowable credit.--In 
                the case of any taxpayer who makes an election under 
                this subparagraph--
                            ``(i) subparagraph (A) shall be applied by 
                        substituting `$25,000,000' for `$20,000,000', 
                        and
                            ``(ii) the aggregate amount of the credit 
                        allowed under subsection (a) with respect to 
                        such taxpayer for any taxable year for 
                        appliances described in subparagraph (C) and 
                        the additional appliances described in 
                        subparagraph (D) shall not exceed $50,000,000 
                        reduced by the amount of the credit allowed 
                        under subsection (a) to the taxpayer (or any 
                        predecessor) for all prior taxable years with 
                        respect to such appliances.
                    ``(C) Appliances described.--The appliances 
                described in this subparagraph are--
                            ``(i) clothes washers described in 
                        subsection (b)(1)(B)(i), and
                            ``(ii) refrigerators described in 
                        subsection (b)(1)(C)(i).
                    ``(D) Additional appliances.--The additional 
                appliances described in this subparagraph are--
                            ``(i) refrigerators described in subsection 
                        (b)(1)(C)(ii)(I), and
                            ``(ii) refrigerators described in 
                        subsection (b)(1)(C)(ii)(II).
            ``(3) Limitation based on gross receipts.--The credit 
        allowed under subsection (a) with respect to a taxpayer for the 
        taxable year shall not exceed an amount equal to 2 percent of 
        the average annual gross receipts of the taxpayer for the 3 
        taxable years preceding the taxable year in which the credit is 
        determined.
            ``(4) Gross receipts.--For purposes of this subsection, the 
        rules of paragraphs (2) and (3) of section 448(c) shall apply.
    ``(f) Definitions.--For purposes of this section--
            ``(1) Qualified energy efficient appliance.--The term 
        `qualified energy efficient appliance' means--
                    ``(A) any dishwasher described in subsection 
                (b)(1)(A),
                    ``(B) any clothes washer described in subsection 
                (b)(1)(B), and
                    ``(C) any refrigerator described in subsection 
                (b)(1)(C).
            ``(2) Dishwasher.--The term `dishwasher' means a 
        residential dishwasher subject to the energy conservation 
        standards established by the Department of Energy.
            ``(3) Clothes washer.--The term `clothes washer' means a 
        residential model clothes washer, including a residential style 
        coin operated washer.
            ``(4) Refrigerator.--The term `refrigerator' means a 
        residential model automatic defrost refrigerator-freezer which 
        has an internal volume of at least 16.5 cubic feet.
            ``(5) MEF.--The term `MEF' means the modified energy factor 
        established by the Department of Energy for compliance with the 
        Federal energy conservation standards.
            ``(6) EF.--The term `EF' means the energy factor 
        established by the Department of Energy for compliance with the 
        Federal energy conservation standards.
            ``(7) WF.--The term `WF' means Water Factor (as determined 
        by the Secretary of Energy).
            ``(8) Produced.--The term `produced' includes manufactured.
            ``(9) 2001 energy conservation standard.--The term `2001 
        energy conservation standard' means the energy conservation 
        standards promulgated by the Department of Energy and effective 
        July 1, 2001.
    ``(g) Special Rules.--For purposes of this section--
            ``(1) In general.--Rules similar to the rules of 
        subsections (c), (d), and (e) of section 52 shall apply.
            ``(2) Controlled group.--
                    ``(A) In general.--All persons treated as a single 
                employer under subsection (a) or (b) of section 52 or 
                subsection (m) or (o) of section 414 shall be treated 
                as a single producer.
                    ``(B) Inclusion of foreign corporations.--For 
                purposes of subparagraph (A), in applying subsections 
                (a) and (b) of section 52 to this section, section 1563 
                shall be applied without regard to subsection (b)(2)(C) 
                thereof.
            ``(3) Verification.--No amount shall be allowed as a credit 
        under subsection (a) with respect to which the taxpayer has not 
        submitted such information or certification as the Secretary, 
        in consultation with the Secretary of Energy, determines 
        necessary.''.
    (b) Conforming Amendment.--Section 38(b) (relating to general 
business credit) is amended by striking ``plus'' at the end of 
paragraph (19), by striking the period at the end of paragraph (20) and 
inserting ``, plus'', and by adding at the end the following new 
paragraph:
            ``(21) the energy efficient appliance credit determined 
        under section 45K(a).''.
    (c) Clerical Amendment.--The table of sections for subpart D of 
part IV of subchapter A of chapter 1 is amended by adding at the end 
the following new item:

``45K. Energy efficient appliance credit.''.
    (d) Effective Date.--The amendments made by this section shall 
apply to appliances produced after the date of the enactment of this 
Act, in taxable years ending after such date.

SEC. 506. INCENTIVE FOR CERTAIN ENERGY EFFICIENT PROPERTY USED IN 
              BUSINESS.

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

``SEC. 200. ENERGY PROPERTY DEDUCTION.

    ``(a) In General.--There shall be allowed as a deduction for the 
taxable year an amount equal to the sum of--
            ``(1) the amount determined under subsection (b) for each 
        energy property of the taxpayer placed in service during such 
        taxable year, and
            ``(2) the energy efficient residential rental building 
        property deduction determined under subsection (d).
    ``(b) Amount for Energy Property.--
            ``(1) In general.--The amount determined under this 
        subsection for the taxable year for each item of energy 
        property is--
                    ``(A) $900 for each Tier 2 electric heat pump water 
                heater,
                    ``(B) $900 for each Tier 2 natural gas, oil or 
                propane furnace or hot water boiler installed in 2006 
                ($750 for equipment installed in 2007, $600 for 
                equipment installed in 2008),
                    ``(C) $600 for each Tier 1 natural gas, oil, or 
                propane furnace, or hot water boiler installed in 2006 
                ($450 for equipment installed in 2007, $300 for 
                equipment installed in 2008),
                    ``(D) $900 for each Tier 2 natural gas, oil, or 
                propane water heater,
                    ``(E) $150 for each Tier 1 natural gas, oil, or 
                propane water heater,
                    ``(F) $150 for a Tier 1advanced main air 
                circulating fan which is installed in a furnace with an 
                Annual Fuel Utilization Efficiency of less than 92 
                percent,
                    ``(G) $900 for each Tier 2 combination space and 
                water heating system,
                    ``(H) $150 for each Tier 1combination space and 
                water heating system,
                    ``(I) $750 for each Tier 2 geothermal heat pump,
                    ``(J) $900 for each Tier 2 central air conditioner 
                or central heat pump ($600 for equipment installed in 
                2008), and
                    ``(K) $600 for each Tier 1central air conditioner 
                or central heat pump ($300 for equipment installed in 
                2008).
            ``(2) Safety certifications.--A rule similar to the rule of 
        section 25E(b)(2) shall apply for purposes of this section.
    ``(c) Energy Property Defined.--For purposes of this part, the term 
`energy property' means any property--
            ``(1) which is energy efficient building property (as 
        defined in section 25E(d),
            ``(2)(A) the construction, reconstruction, or erection of 
        which is completed by the taxpayer, or
            ``(B) which is acquired by the taxpayer if the original use 
        of such property commences with the taxpayer, and
            ``(3) with respect to which depreciation (or amortization 
        in lieu of depreciation) is allowable.
    ``(d) Energy Efficient Residential Rental Building Property 
Deduction.--
            ``(1) Deduction allowed.--For purposes of subsection (a)--
                    ``(A) In general.--The energy efficient residential 
                rental building property deduction determined under 
                this subsection is an amount equal to energy efficient 
                residential rental building property expenditures made 
                by a taxpayer for the taxable year.
                    ``(B) Maximum amount of deduction.--The amount of 
                energy efficient residential rental building property 
                expenditures taken into account under subparagraph (A) 
                with respect to each dwelling unit shall not exceed--
                            ``(i) $6,000 in the case of a percentage 
                        reduction of 50 percent as determined under 
                        paragraph (2)(B), and
                            ``(ii) $12,000 times the percentage 
                        reduction in the case of a percentage reduction 
                        of less than 50 percent as determined under 
                        paragraph (2)(B).
                    ``(C) Year deduction allowed.--The deduction under 
                subparagraph (A) shall be allowed in the taxable year 
                in which the construction, reconstruction, erection, or 
                rehabilitation of the property is completed.
            ``(2) Energy efficient residential rental building property 
        expenditures.--For purposes of this subsection--
                    ``(A) In general.--The term `energy efficient 
                residential rental building property expenditures' 
                means an amount paid or incurred in connection with 
                construction, reconstruction, erection, or 
                rehabilitation of energy efficient residential rental 
                building property--
                            ``(i) for which depreciation is allowable 
                        under section 167,
                            ``(ii) which is located in the United 
                        States, and
                            ``(iii) the construction, reconstruction, 
                        erection, or rehabilitation of which is 
                        completed by the taxpayer.
                Such term includes expenditures for labor costs 
                properly allocable to the onsite preparation, assembly, 
                or original installation of the property.
                    ``(B) Energy efficient residential rental building 
                property.--
                            ``(i) In general.--The term `energy 
                        efficient residential rental building property' 
                        means any property which reduces total annual 
                        energy and power costs with respect to heating 
                        and cooling of the building by a percentage 
                        certified according to clause (ii).
                            ``(ii) Procedures.--
                                    ``(I) In general.--For purposes of 
                                clause (i), energy usage and costs 
                                shall be demonstrated by performance-
                                based compliance.
                                    ``(II) Performance-based 
                                compliance.--Performance-based 
                                compliance shall be demonstrated by 
                                calculating the percent energy cost 
                                savings for heating and cooling, as 
                                applicable, with respect to a dwelling 
                                unit when compared to the original 
                                condition of the dwelling unit.
                                    ``(III) Computer software.--
                                Computer software shall be used in 
                                support of performance-based compliance 
                                under subclause (II) and such software 
                                shall meet all of the procedures and 
                                methods for calculating energy savings 
                                reductions which are promulgated by the 
                                Secretary of Energy. Such regulations 
                                on the specifications for software and 
                                verification protocols shall be based 
                                on the 2005 California Residential 
                                Alternative Calculation Method Approval 
                                Manual.
                                    ``(IV) Calculation requirements.--
                                In calculating tradeoffs and energy 
                                performance, the regulations prescribed 
                                under this clause shall prescribe for 
                                the taxable year the costs per unit of 
                                energy and power, such as kilowatt 
                                hour, kilowatt, gallon of fuel oil, and 
                                cubic foot or Btu of natural gas, which 
                                may be dependent on time of usage. 
                                Where a State has developed annual 
                                energy usage and cost reduction 
                                procedures based on time of usage costs 
                                for use in the performance standards of 
                                the State's building energy code prior 
                                to the effective date of this section, 
                                the State may use those annual energy 
                                usage and cost reduction procedures in 
                                lieu of those adopted by the Secretary.
                                    ``(V) Approval of software 
                                submissions.--The Secretary shall 
                                approve software submissions which 
                                comply with the requirements of 
                                subclause (III).
                                    ``(VI) Procedures for inspection 
                                and testing of homes.--The Secretary 
                                shall ensure that procedures for the 
                                inspection and testing for compliance 
                                comply with the calculation 
                                requirements under subclause (IV) of 
                                this clause and clause (iv).
                            ``(iii) Determinations of compliance.--A 
                        determination of compliance with respect to 
                        energy efficient residential rental building 
                        property made for the purposes of this 
                        subparagraph shall be filed with the Secretary 
                        not later than 1 year after the date of such 
                        determination and shall include the TIN of the 
                        certifier, the address of the building in 
                        compliance, and the identity of the person for 
                        whom such determination was performed. 
                        Determinations of compliance filed with the 
                        Secretary shall be available for inspection by 
                        the Secretary of Energy.
                            ``(iv) Compliance.--
                                    ``(I) In general.--The Secretary, 
                                after consultation with the Secretary 
                                of Energy, shall establish requirements 
                                for certification and compliance 
                                procedures after examining the 
                                requirements for energy consultants and 
                                home energy ratings providers specified 
                                by the Mortgage Industry National Home 
                                Energy Rating Standards.
                                    ``(II) Individuals qualified to 
                                determine compliance.--The 
                                determination of compliance may be 
                                provided by a local building regulatory 
                                authority, a utility, a manufactured 
                                home production inspection primary 
                                inspection agency (IPIA), a home 
                                inspector, or an accredited home energy 
                                rating system provider. All providers 
                                shall be accredited, or otherwise 
                                authorized to use approved energy 
                                performance measurement methods, by the 
                                Residential Energy Services Network 
                                (RESNET).
                    ``(C) Allocation of deduction for public 
                property.--In the case of energy efficient residential 
                rental building property which is public property, the 
                Secretary shall promulgate a regulation to allow the 
                allocation of the deduction to the person primarily 
                responsible for designing the improvements to the 
                property in lieu of the public entity which is the 
                owner of such property. Such person shall be treated as 
                the taxpayer for purposes of this subsection.
    ``(e) Special Rules.--For purposes of this section--
            ``(1) Basis reduction.--For purposes of this subtitle, if a 
        deduction is allowed under this section with respect to any 
        property, the basis of such property shall be reduced by the 
        amount of the deduction so allowed.
            ``(2) Double benefit.--Property which would, but for this 
        paragraph, be eligible for deduction under more than one 
        provision of this section shall be eligible only under one such 
        provision, the provision specified by the taxpayer.
    ``(f) Regulations.--The Secretary shall promulgate such regulations 
as necessary to take into account new technologies regarding energy 
efficiency and renewable energy for purposes of determining energy 
efficiency and savings under this section.
    ``(g) Termination.--This section shall not apply with respect to--
            ``(1) any energy property placed in service after December 
        31, 2008, and
            ``(2) any energy efficient residential rental building 
        property expenditures in connection with property--
                    ``(A) placed in service after December 31, 2009, or
                    ``(B) the construction, reconstruction, erection, 
                or rehabilitation of which is not completed on or 
                before December 31, 2009.''.
    (b) Conforming Amendments.--
            (1) Section 48(a)(3)(A) is amended to read as follows:
                    ``(A) which is equipment used to produce, 
                distribute, or use energy derived from a geothermal 
                deposit (within the meaning of section 613(e)(2)), but 
                only, in the case of electricity generated by 
                geothermal power, up to (but not including) the 
                electrical transmission stage,''.
            (2) Subparagraph (B) of section 168(e)(3) is amended--
                    (A) in clause (vi)(I)--
                            (i) by striking ``section 48(a)(3)'' and 
                        inserting ``section 200(d)(1)'', and
                            (ii) by striking ``clause (i)'' and 
                        inserting ``such subparagraph (A)'', and
                    (B) in the last sentence, by striking ``section 
                48(a)(3)'' and inserting ``section 200(c)(3)''.
            (3) Section 1016(a), as amended by this Act, is amended by 
        striking ``and'' at the end of paragraph (35), by striking the 
        period at the end of paragraph (36) and inserting ``, and'', 
        and by inserting the following new paragraph:
            ``(37) for amounts allowed as a deduction under section 
        200(a).''.
    (c) Clerical Amendment.--The table of sections for part VI of 
subchapter B of chapter 1 is amended by adding at the end the following 
new item:

``200. Energy property deduction.''.
    (d) Authorization of Appropriations.--There are authorized to be 
appropriated to the Department of Energy out of amounts not already 
appropriated such sums as necessary to carry out this section.
    (e) Effective Date.--The amendments made by this section shall 
apply to taxable years beginning after December 31, 2005.

SEC. 507. CREDIT FOR BUSINESS INSTALLATION OF QUALIFIED FUEL CELLS.

    (a) In General.--Section 48(a)(3)(A) of the Internal Revenue Code 
of 1986 (defining energy property), as amended by section 301, 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) Qualified Fuel Cell Property.--Section 48 of such Code 
(relating to energy credit) is amended by adding at the end the 
following new subsection:
    ``(c) 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 generates at least 0.5 
        kilowatt of electricity using an electrochemical process.
            ``(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, 2009.''.
    (c) Energy Percentage.--Subparagraph (A) of section 48(a)(2) of 
such Code (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, 30 percent, and
                            ``(ii) in the case of any other energy 
                        property, 10 percent.''.
    (d) Conforming Amendment.--Section 48(a)(1) of such Code is amended 
by inserting ``except as provided in subsection (c)(2),'' before ``the 
energy''.
    (e) Effective Date.--The amendments made by this section shall 
apply to periods after December 31, 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. 508. CREDIT FOR NONBUSINESS INSTALLATION OF QUALIFIED FUEL CELLS 
              [NEW ADDITION NOT UPDATED].

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

``SEC. 25F. NONBUSINESS INSTALLATION OF QUALIFIED FUEL CELLS.

    ``(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 30 percent of the 
qualified fuel cell property expenditures made by the taxpayer during 
such year.
    ``(b) Limitations.--
            ``(1) Maximum credit.--The credit allowed under subsection 
        (a) shall not exceed $500 for each 0.5 kilowatt of capacity of 
        qualified fuel cell property.
            ``(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 reasonably can be 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) 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), and
                    ``(E) such property meets appropriate fire and 
                electric code requirements.
    ``(c) Qualified Fuel Cell Property Expenditure.--For purposes of 
this section, the term `qualified fuel cell property expenditure' means 
an expenditure for any qualified fuel cell property (as defined in 
section 48(c)(1)).
    ``(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 residence by 2 or more 
        individuals, the following rules shall apply:
                    ``(A) The amount of the credit allowable under 
                subsection (a) by reason of expenditures made during 
                such calendar year by any of such individuals with 
                respect to such dwelling unit shall be determined by 
                treating all of such individuals as 1 taxpayer whose 
                taxable year is such calendar year.
                    ``(B) There shall be allowable, with respect to 
                such expenditures to each of such individuals, a credit 
                under subsection (a) for the taxable year in which such 
                calendar year ends in an amount which bears the same 
                ratio to the amount determined under subparagraph (A) 
                as the amount of such expenditures made by such 
                individual during such calendar year bears to the 
                aggregate of such expenditures made by all of such 
                individuals during such calendar year.
            ``(2) Tenant-stockholder in cooperative housing 
        corporation.--In the case of an individual who is a tenant-
        stockholder (as defined in section 216) in a cooperative 
        housing corporation (as defined in such section), such 
        individual shall be treated as having made the individual's 
        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 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.
            ``(4) 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.
            ``(5) 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.
            ``(6) 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, 2009.''.
    (b) Conforming Amendments.--
            (1) Section 1016(a) of such Code is amended by striking 
        ``and'' at the end of paragraph (36), by striking the period at 
        the end of paragraph (37) and inserting ``, and'', and by 
        adding at the end the following new paragraph:
            ``(38) to the extent provided in section 25F(e), in the 
        case of amounts with respect to which a credit has been allowed 
        under section 25F.''.
            (2) The table of sections for subpart A of part IV of 
        subchapter A of chapter 1 of such Code is amended by adding at 
        the end the following new item:

``Sec. 25F. Nonbusiness installation of qualified fuel cells.''.
    (c) Effective Date.--The amendments made by this section shall 
apply to taxable years ending after December 31, 2005.

SEC. 509. NEW NONREFUNDABLE PERSONAL CREDITS ALLOWED AGAINST REGULAR 
              AND MINIMUM TAXES.

    (a) In General.--
            (1) Section 25c.--Section 25C(c), as added by this Act, is 
        amended by adding at the end the following new paragraph:
            ``(12) 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(f), as added by this Act, is 
        amended by adding at the end the following new paragraph:
            ``(6) 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.''.
            (3) Section 25e.--Section 25E(e), as added by this Act, is 
        amended by adding at the end the following new paragraph:
            ``(7) 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.''.
            (4) Section 25f.--Section 25F(b), as added by 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, 25D, 25E, and 25F'' after ``this section''.
            (2) Section 24(b)(3)(B) is amended by striking ``and 25B'' 
        and inserting ``, 25B, 25C, 25D, 25E, and 25F''.
            (3) Section 25(e)(1)(C) is amended by inserting ``25C, 25D, 
        25E, and 25F'' after ``25B,''.
            (4) Section 25B(g)(2) is amended by striking ``section 23'' 
        and inserting ``sections 23, 25C, 25D, 25E, and 25F''.
            (5) Section 26(a)(1) is amended by striking ``and 25B'' and 
        inserting ``25B, 25C, 25D, 25E, and 25F''.
            (6) Section 904(i) is amended by striking ``and 25B'' and 
        inserting ``25B, 25C, 25D, 25E, and 25F''.
            (7) Section 1400C(d) is amended by striking ``and 25B'' and 
        inserting ``25B, 25C, 25D, 25E, and 25F''.
    (c) Effective Date.--The amendments made by this section shall 
apply to taxable years beginning after December 31, 2005.

SEC. 510. 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, 45I, 45J, and 45K,
                            ``(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.

                 Subtitle B--Transportation Incentives

SEC. 511. ALTERNATIVE MOTOR VEHICLE CREDIT.

    (a) In General.--Subpart B of part IV of subchapter A of chapter 1 
(relating to foreign tax credit, etc.) is amended by adding at the end 
the following new section:

``SEC. 30B. ALTERNATIVE 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--
            ``(1) the new qualified fuel cell motor vehicle credit 
        determined under subsection (b), and
            ``(2) the new qualified hybrid motor vehicle credit 
        determined under subsection (c).
    ``(b) New Qualified Fuel Cell Motor Vehicle Credit.--
            ``(1) In general.--For purposes of subsection (a), the new 
        qualified fuel cell motor vehicle credit determined under this 
        subsection with respect to a new qualified fuel cell motor 
        vehicle placed in service by the taxpayer during the taxable 
        year is--
                    ``(A) $8,000 ($4,000 in the case of vehicles placed 
                in service after December 31, 2009), if such vehicle 
                has a gross vehicle weight rating of not more than 
                8,500 pounds,
                    ``(B) $10,000, if such vehicle has a gross vehicle 
                weight rating of more than 8,500 pounds but not more 
                than 14,000 pounds,
                    ``(C) $20,000, if such vehicle has a gross vehicle 
                weight rating of more than 14,000 pounds but not more 
                than 26,000 pounds, and
                    ``(D) $40,000, if such vehicle has a gross vehicle 
                weight rating of more than 26,000 pounds.
            ``(2) Increase for fuel efficiency.--
                    ``(A) In general.--The amount determined under 
                paragraph (1)(A) with respect to a new qualified fuel 
                cell motor vehicle which is a passenger automobile or 
                light truck shall be increased by--
                            ``(i) $1,000, if such vehicle achieves at 
                        least 150 percent but less than 175 percent of 
                        the 2002 model year city fuel economy,
                            ``(ii) $1,500, if such vehicle achieves at 
                        least 175 percent but less than 200 percent of 
                        the 2002 model year city fuel economy,
                            ``(iii) $2,000, if such vehicle achieves at 
                        least 200 percent but less than 225 percent of 
                        the 2002 model year city fuel economy,
                            ``(iv) $2,500, if such vehicle achieves at 
                        least 225 percent but less than 250 percent of 
                        the 2002 model year city fuel economy,
                            ``(v) $3,000, if such vehicle achieves at 
                        least 250 percent but less than 275 percent of 
                        the 2002 model year city fuel economy,
                            ``(vi) $3,500, if such vehicle achieves at 
                        least 275 percent but less than 300 percent of 
                        the 2002 model year city fuel economy, and
                            ``(vii) $4,000, if such vehicle achieves at 
                        least 300 percent of the 2002 model year city 
                        fuel economy.
                    ``(B) 2002 model year city fuel economy.--For 
                purposes of subparagraph (A), the 2002 model year city 
                fuel economy with respect to a vehicle shall be 
                determined in accordance with the following tables:
                            ``(i) In the case of a passenger 
                        automobile:

``If vehicle inertia                           The 2002 model year city
     weight class is:                                  fuel economy is:
    1,500 or 1,750 lbs............................            45.2 mpg 
    2,000 lbs.....................................            39.6 mpg 
    2,250 lbs.....................................            35.2 mpg 
    2,500 lbs.....................................            31.7 mpg 
    2,750 lbs.....................................            28.8 mpg 
    3,000 lbs.....................................            26.4 mpg 
    3,500 lbs.....................................            22.6 mpg 
    4,000 lbs.....................................            19.8 mpg 
    4,500 lbs.....................................            17.6 mpg 
    5,000 lbs.....................................            15.9 mpg 
    5,500 lbs.....................................            14.4 mpg 
    6,000 lbs.....................................            13.2 mpg 
    6,500 lbs.....................................            12.2 mpg 
    7,000 to 8,500 lbs............................            11.3 mpg.
                            ``(ii) In the case of a light truck:

``If vehicle inertia                           The 2002 model year city
     weight class is:                                  fuel economy is:
    1,500 or 1,750 lbs............................            39.4 mpg 
    2,000 lbs.....................................            35.2 mpg 
    2,250 lbs.....................................            31.8 mpg 
    2,500 lbs.....................................            29.0 mpg 
    2,750 lbs.....................................            26.8 mpg 
    3,000 lbs.....................................            24.9 mpg 
    3,500 lbs.....................................            21.8 mpg 
    4,000 lbs.....................................            19.4 mpg 
    4,500 lbs.....................................            17.6 mpg 
    5,000 lbs.....................................            16.1 mpg 
    5,500 lbs.....................................            14.8 mpg 
    6,000 lbs.....................................            13.7 mpg 
    6,500 lbs.....................................            12.8 mpg 
    7,000 to 8,500 lbs............................            12.1 mpg.
                    ``(C) Vehicle inertia weight class.--For purposes 
                of subparagraph (B), the term `vehicle inertia weight 
                class' has the same meaning as when defined 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.).
            ``(3) New qualified fuel cell motor vehicle.--For purposes 
        of this subsection, the term `new qualified fuel cell motor 
        vehicle' means a motor vehicle--
                    ``(A) which is propelled by power derived from one 
                or more cells which convert chemical energy directly 
                into electricity by combining oxygen with hydrogen fuel 
                which is stored on board the vehicle in any form and 
                may or may not require reformation prior to use,
                    ``(B) which, in the case of a passenger automobile 
                or light truck, has received a certificate that such 
                vehicle meets or exceeds the Bin 5 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 for that make 
                and model year vehicle,
                    ``(C) the original use of which commences with the 
                taxpayer,
                    ``(D) which is acquired for use or lease by the 
                taxpayer and not for resale, and
                    ``(E) which is made by a manufacturer.
    ``(c) New Qualified Hybrid Motor Vehicle Credit.--
            ``(1) In general.--For purposes of subsection (a), the new 
        qualified hybrid motor vehicle credit determined under this 
        subsection with respect to a new qualified hybrid motor vehicle 
        placed in service by the taxpayer during the taxable year is 
        the credit amount determined under paragraph (2).
            ``(2) Credit amount.--
                    ``(A) In general.--The credit amount determined 
                under this paragraph shall be determined in accordance 
                with the following tables:
                            ``(i) In the case of a new qualified hybrid 
                        motor vehicle which is a passenger automobile, 
                        medium duty passenger vehicle, or light truck 
                        and which provides the following percentage of 
                        the maximum available power:

``If percentage of the maximum
     available power is:                          The credit amount is:
    At least 5 percent but less than 10 percent...                $250 
    At least 10 percent but less than 20 percent..                $500 
    At least 20 percent but less than 30 percent..                $750 
    At least 30 percent...........................              $1,000.
                            ``(ii) In the case of a new qualified 
                        hybrid motor vehicle which is a heavy duty 
                        hybrid motor vehicle and which provides the 
                        following percentage of the maximum available 
                        power:
                                    ``(I) If such vehicle has a gross 
                                vehicle weight rating of not more than 
                                14,000 pounds:

``If percentage of the maximum
     available power is:                          The credit amount is:
    At least 20 percent but less than 30 percent..              $1,000 
    At least 30 percent but less than 40 percent..              $1,750 
    At least 40 percent but less than 50 percent..              $2,000 
    At least 50 percent but less than 60 percent..              $2,250 
    At least 60 percent...........................              $2,500.
                                    ``(II) If such vehicle has a gross 
                                vehicle weight rating of more than 
                                14,000 but not more than 26,000 pounds:

``If percentage of the maximum
     available power is:                          The credit amount is:
    At least 20 percent but less than 30 percent..              $4,000 
    At least 30 percent but less than 40 percent..              $4,500 
    At least 40 percent but less than 50 percent..              $5,000 
    At least 50 percent but less than 60 percent..              $5,500 
    At least 60 percent...........................              $6,000.
                                    ``(III) If such vehicle has a gross 
                                vehicle weight rating of more than 
                                26,000 pounds:

``If percentage of the maximum
     available power is:                          The credit amount is:
    At least 20 percent but less than 30 percent..              $6,000 
    At least 30 percent but less than 40 percent..              $7,000 
    At least 40 percent but less than 50 percent..              $8,000 
    At least 50 percent but less than 60 percent..              $9,000 
    At least 60 percent...........................             $10,000.
                    ``(B) Increase for fuel efficiency.--
                            ``(i) Amount.--The amount determined under 
                        subparagraph (A)(i) with respect to a new 
                        qualified hybrid motor vehicle which is a 
                        passenger automobile or light truck shall be 
                        increased by--
                                    ``(I) $500, if such vehicle 
                                achieves at least 125 percent but less 
                                than 150 percent of the 2002 model year 
                                city fuel economy,
                                    ``(II) $1,000, if such vehicle 
                                achieves at least 150 percent but less 
                                than 175 percent of the 2002 model year 
                                city fuel economy,
                                    ``(III) $1,500, if such vehicle 
                                achieves at least 175 percent but less 
                                than 200 percent of the 2002 model year 
                                city fuel economy,
                                    ``(IV) $2,000, if such vehicle 
                                achieves at least 200 percent but less 
                                than 225 percent of the 2002 model year 
                                city fuel economy,
                                    ``(V) $2,500, if such vehicle 
                                achieves at least 225 percent but less 
                                than 250 percent of the 2002 model year 
                                city fuel economy, and
                                    ``(VI) $3,000, if such vehicle 
                                achieves at least 250 percent of the 
                                2002 model year city fuel economy.
                            ``(ii) 2002 model year city fuel economy.--
                        For purposes of clause (i), the 2002 model year 
                        city fuel economy with respect to a vehicle 
                        shall be determined on a gasoline gallon 
                        equivalent basis as determined by the 
                        Administrator of the Environmental Protection 
                        Agency using the tables provided in subsection 
                        (b)(2)(B) with respect to such vehicle.
                    ``(C) Increase for accelerated emissions 
                performance.--The amount determined under subparagraph 
                (A)(ii) with respect to an applicable heavy duty hybrid 
                motor vehicle shall be increased by the increased 
                credit amount determined in accordance with the 
                following tables:
                            ``(i) In the case of a vehicle which has a 
                        gross vehicle weight rating of not more than 
                        14,000 pounds:

``If the model year is:             The increased credit amount is:
    2005..........................................              $2,000 
    2006..........................................              $1,500.
                            ``(ii) In the case of a vehicle which has a 
                        gross vehicle weight rating of more than 14,000 
                        pounds but not more than 26,000 pounds:

``If the model year is:             The increased credit amount is:
    2005..........................................              $5,250 
    2006..........................................              $4,000.
                            ``(iii) In the case of a vehicle which has 
                        a gross vehicle weight rating of more than 
                        26,000 pounds:

``If the model year is:             The increased credit amount is:
    2005..........................................              $8,000 
    2006..........................................              $6,000.
                    ``(D) Definitions relating to credit amount.--
                            ``(i) Applicable heavy duty hybrid motor 
                        vehicle.--For purposes of subparagraph (C), the 
                        term `applicable heavy duty hybrid motor 
                        vehicle' means a heavy duty hybrid motor 
                        vehicle which is powered by an internal 
                        combustion or heat engine which is certified as 
                        meeting the emission standards set in the 
                        regulations prescribed by the Administrator of 
                        the Environmental Protection Agency for 2007 
                        and later model year diesel heavy duty engines, 
                        or for 2008 and later model year ottocycle 
                        heavy duty engines, as applicable.
                            ``(ii) Maximum available power.--
                                    ``(I) Passenger automobile, medium 
                                duty passenger vehicle, or light 
                                truck.--For purposes of subparagraph 
                                (A)(i), the term `maximum available 
                                power' means the maximum power 
                                available from the rechargeable energy 
                                storage system, during a standard 10 
                                second pulse power or equivalent test, 
                                divided by such maximum power and the 
                                SAE net power of the heat engine.
                                    ``(II) Heavy duty hybrid motor 
                                vehicle.--For purposes of subparagraph 
                                (A)(ii), the term `maximum available 
                                power' means the maximum power 
                                available from the rechargeable energy 
                                storage system, during a standard 10 
                                second pulse power or equivalent test, 
                                divided by the vehicle's total traction 
                                power. The term `total traction power' 
                                means the sum of the peak power from 
                                the rechargeable energy storage system 
                                and the heat engine peak power of the 
                                vehicle, except that if such storage 
                                system is the sole means by which the 
                                vehicle can be driven, the total 
                                traction power is the peak power of 
                                such storage system.
            ``(3) New qualified hybrid motor vehicle.--For purposes of 
        this subsection, the term `new qualified hybrid motor vehicle' 
        means a motor vehicle--
                    ``(A) which draws propulsion energy from onboard 
                sources of stored energy which are both--
                            ``(i) an internal combustion or heat engine 
                        using combustible fuel, and
                            ``(ii) a rechargeable energy storage 
                        system,
                    ``(B) which, in the case of a passenger automobile, 
                medium duty passenger vehicle, or light truck, has 
                received a certificate that such vehicle meets or 
                exceeds the Bin 5 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 for that make and model year vehicle,
                    ``(C) which, in the case of a heavy duty hybrid 
                motor vehicle, the internal combustion or heat engine 
                of which has received a certificate of conformity under 
                the Clean Air Act as meeting the emission standards set 
                in the regulations prescribed by the Administrator of 
                the Environmental Protection Agency for 2004 through 
                2007 model year diesel heavy duty engines or ottocycle 
                heavy duty engines, as applicable,
                    ``(D) the original use of which commences with the 
                taxpayer,
                    ``(E) which is acquired for use or lease by the 
                taxpayer and not for resale, and
                    ``(F) which is made by a manufacturer.
            ``(4) Heavy duty hybrid motor vehicle.--For purposes of 
        this subsection, the term `heavy duty hybrid motor vehicle' 
        means a new qualified hybrid motor vehicle which has a gross 
        vehicle weight rating of more than 8,500 pounds. Such term does 
        not include a medium duty passenger vehicle.
    ``(d) Application With Other Credits.--The credit allowed under 
subsection (a) for any taxable year shall not exceed the excess (if 
any) of--
            ``(1) the regular tax for the taxable year reduced by the 
        sum of the credits allowable under subpart A and sections 27, 
        29, and 30, over
            ``(2) the tentative minimum tax for the taxable year.
    ``(e) Other Definitions and Special Rules.--For purposes of this 
section--
            ``(1) Consumable fuel.--The term `consumable fuel' means 
        any solid, liquid, or gaseous matter which releases energy when 
        consumed by an auxiliary power unit.
            ``(2) Motor vehicle.--The term `motor vehicle' has the 
        meaning given such term by section 30(c)(2).
            ``(3) City fuel economy.--The city fuel economy with 
        respect to any vehicle shall be measured in a manner which is 
        substantially similar to the manner city fuel economy is 
        measured in accordance with procedures under part 600 of 
        subchapter Q of chapter I of title 40, Code of Federal 
        Regulations, as in effect on the date of the enactment of this 
        section.
            ``(4) Other terms.--The terms `automobile', `passenger 
        automobile', `medium duty passenger vehicle', `light truck', 
        and `manufacturer' 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.).
            ``(5) Reduction in basis.--For purposes of this subtitle, 
        the basis of any property for which a credit is allowable under 
        subsection (a) shall be reduced by the amount of such credit so 
        allowed (determined without regard to subsection (e)).
            ``(6) No double benefit.--The amount of any deduction or 
        other credit allowable under this chapter--
                    ``(A) for any incremental cost taken into account 
                in computing the amount of the credit determined under 
                subsection (d) shall be reduced by the amount of such 
                credit attributable to such cost, and
                    ``(B) with respect to a vehicle described under 
                subsection (b) or (c), shall be reduced by the amount 
                of credit allowed under subsection (a) for such vehicle 
                for the taxable year.
            ``(7) Property used by tax-exempt entities.--In the case of 
        a credit amount which is allowable with respect to a motor 
        vehicle which is acquired by an entity exempt from tax under 
        this chapter, the person which sells or leases such vehicle to 
        the entity shall be treated as the taxpayer with respect to the 
        vehicle for purposes of this section and the credit shall be 
        allowed to such person, but only if the person clearly 
        discloses to the entity at the time of any sale or lease the 
        specific amount of any credit otherwise allowable to the entity 
        under this section.
            ``(8) Recapture.--The Secretary shall, by regulations, 
        provide for recapturing the benefit of any credit allowable 
        under subsection (a) with respect to any property which ceases 
        to be property eligible for such credit (including recapture in 
        the case of a lease period of less than the economic life of a 
        vehicle).
            ``(9) Property used outside united states, etc., not 
        qualified.--No credit shall be allowed under subsection (a) 
        with respect to any property referred to in section 50(b) or 
        with respect to the portion of the cost of any property taken 
        into account under section 179.
            ``(10) Election to not take credit.--No credit shall be 
        allowed under subsection (a) for any vehicle if the taxpayer 
        elects to not have this section apply to such vehicle.
            ``(11) Carryback and carryforward allowed.--
                    ``(A) In general.--If the credit amount allowable 
                under subsection (a) for a taxable year exceeds the 
                amount of the limitation under subsection (e) for such 
                taxable year (in this paragraph referred to as the 
                `unused credit year'), such excess shall be allowed as 
                a credit carryback for each of the 3 taxable years 
                beginning after the date of the enactment of this 
                section, which precede the unused credit year and a 
                credit carryforward for each of the 20 taxable years 
                which succeed the unused credit year.
                    ``(B) Rules.--Rules similar to the rules of section 
                39 shall apply with respect to the credit carryback and 
                credit carryforward under subparagraph (A).
            ``(12) 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.
    ``(f) Regulations.--
            ``(1) In general.--Except as provided in paragraph (2), the 
        Secretary shall promulgate such regulations as necessary to 
        carry out the provisions of this section.
            ``(2) Coordination in prescription of certain 
        regulations.--The Secretary of the Treasury, 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.
    ``(g) Termination.--This section shall not apply to any property 
purchased after--
            ``(1) in the case of a new qualified fuel cell motor 
        vehicle (as described in subsection (b)), December 31, 2014, 
        and
            ``(2) in the case of any other property, December 31, 
        2010.''.
    (b) Conforming Amendments.--
            (1) Section 1016(a) is amended by striking ``and'' at the 
        end of paragraph (37), by striking the period at the end of 
        paragraph (38) and inserting ``, and'', and by adding at the 
        end the following new paragraph:
            ``(39) to the extent provided in section 30B(e)(5).''.
            (2) Section 55(c)(2) is amended by inserting ``30B(d),'' 
        after ``30(b)(3)''.
            (3) Section 6501(m) is amended by inserting ``30B(e)(10),'' 
        after ``30(d)(4),''.
            (4) 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 new item:

``30B. Alternative 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.

                    Subtitle C--Industry Incentives

SEC. 521. ENERGY CREDIT FOR COMBINED HEAT AND POWER SYSTEM PROPERTY.

    (a) In General.--Section 48(a)(3)(A) (defining energy property), as 
amended by this Act, is amended to read as follows:
                    ``(A) which is--
                            ``(i) equipment used to produce, 
                        distribute, or use energy derived from a 
                        geothermal deposit (within the meaning of 
                        section 613(e)(2)), but only, in the case of 
                        electricity generated by geothermal power, up 
                        to (but not including) the electrical 
                        transmission stage, or
                            ``(ii) combined heat and power system 
                        property,''.
    (b) Combined Heat and Power System Property.--Section 48 (relating 
to energy credit) is amended by redesignating subsection (b) as 
paragraph (5) of subsection (a), by moving such paragraph (5) two ems 
to the right, and by adding at the end the following new subsection:
    ``(b) Combined Heat and Power System Property.--For purposes of 
subsection (a)(3)(A)(ii)--
            ``(1) Combined heat and power system property.--The term 
        `combined heat and power system property' means property 
        comprising a system--
                    ``(A) which uses the same energy source for the 
                simultaneous or sequential generation of electrical 
                power, mechanical shaft power, or both, in combination 
                with the generation of steam or other forms of useful 
                thermal energy (including heating and cooling 
                applications),
                    ``(B) which has an electrical capacity of not more 
                than 15 megawatts or a mechanical energy capacity of 
                not more than 2,000 horsepower or an equivalent 
                combination of electrical and mechanical energy 
                capacities,
                    ``(C) which produces--
                            ``(i) at least 20 percent of its total 
                        useful energy in the form of thermal energy 
                        which is not used to produce electrical or 
                        mechanical power (or combination thereof), and
                            ``(ii) at least 20 percent of its total 
                        useful energy in the form of electrical or 
                        mechanical power (or combination thereof),
                    ``(D) the energy efficiency percentage of which 
                exceeds 60 percent, and
                    ``(E) which is placed in service before January 1, 
                2009.
            ``(2) Special rules.--
                    ``(A) Energy efficiency percentage.--For purposes 
                of this subsection, the energy efficiency percentage of 
                a system is the fraction--
                            ``(i) the numerator of which is the total 
                        useful electrical, thermal, and mechanical 
                        power produced by the system at normal 
                        operating rates, and expected to be consumed in 
                        its normal application, and
                            ``(ii) the denominator of which is the 
                        lower heating value of the fuel sources for the 
                        system.
                    ``(B) Determinations made on btu basis.--The energy 
                efficiency percentage and the percentages under 
                paragraph (1)(C) shall be determined on a Btu basis.
                    ``(C) Input and output property not included.--The 
                term `combined heat and power system property' does not 
                include property used to transport the energy source to 
                the facility or to distribute energy produced by the 
                facility.
                    ``(D) Public utility property.--
                            ``(i) Accounting rule for public utility 
                        property.--If the combined heat and power 
                        system property is public utility property (as 
                        defined in section 168(i)(10)), the taxpayer 
                        may only claim the credit under subsection (a) 
                        if, with respect to such property, the taxpayer 
                        uses a normalization method of accounting.
                            ``(ii) Certain exception not to apply.--The 
                        matter in subsection (a)(3) which follows 
                        subparagraph (D) thereof shall not apply to 
                        combined heat and power system property.
                    ``(E) Nonapplication of certain rules.--For 
                purposes of determining if the term `combined heat and 
                power system property' includes technologies which 
                generate electricity or mechanical power using back-
                pressure steam turbines in place of existing pressure-
                reducing valves or which make use of waste heat from 
                industrial processes such as by using organic rankine, 
                stirling, or kalina heat engine systems, paragraph (1) 
                shall be applied without regard to subparagraphs (A), 
                (C), and (D) thereof.''
            ``(3) Systems using bagasse.--If a system is designed to 
        use bagasse for at least 90 percent of the energy source--
                    ``(A) paragraph (1)(D) shall not apply, but
                    ``(B) the amount of credit determined under 
                subsection (a) with respect to such system shall not 
                exceed the amount which bears the same ratio to such 
                amount of credit (determined without regard to this 
                paragraph) as the energy efficiency percentage of such 
                system bears to 60 percent.''.
    (c) Effective Date.--The amendments made by this subsection shall 
apply to periods after December 31, 2005, in taxable years ending after 
such date, 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).
                                 <all>