II 109th CONGRESS 1st Session S. 1022 IN THE SENATE OF THE UNITED STATES May 12, 2005 Mr. Smith (for himself, Mrs. Lincoln, and Mr. Grassley) introduced the following bill; which was read twice and referred to the Committee on Finance A BILL To amend the Internal Revenue Code of 1986 to allow for an energy efficient appliance credit.

1.

Short title

This Act may be cited as the Resource Efficient Appliance Incentives Act of 2005..

2.

Credit for energy efficient Appliances

(a)

In general

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

45J.

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 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 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 subparagraph, 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 subparagraph, the WF savings percentage is the ratio of— (i)the WF required by the Energy Star program for clothes washers in 2010 minus the WF required by the Energy Star program for clothes washers in 2007, to (ii)the WF required by the Energy Star program for clothes washers in 2010. (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) of the Internal Revenue Code of 1986 (relating to general 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 energy efficient appliance credit determined under section 45J(a). . (c)

Clerical amendment

The table of sections for subpart D of part IV of subchapter A of chapter 1 of the Internal Revenue Code of 1986 is amended by adding at the end the following new item: Sec. 45J. 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.