[Congressional Bills 109th Congress]
[From the U.S. Government Publishing Office]
[S. 727 Introduced in Senate (IS)]






109th CONGRESS
  1st Session
                                 S. 727

To provide tax incentives to promote the conservation and production of 
                              natural gas.


_______________________________________________________________________


                   IN THE SENATE OF THE UNITED STATES

                             April 6, 2005

 Mr. Alexander (for himself and Mr. Johnson) introduced the following 
  bill; which was read twice and referred to the Committee on Finance

_______________________________________________________________________

                                 A BILL


 
To provide tax incentives to promote the conservation and production of 
                              natural gas.

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

SECTION 1. SHORT TITLE.

    This Act may be cited as the ``Tax Incentives for the Natural Gas 
Price Reduction Act of 2005''.

SEC. 2. ENCOURAGING COGENERATION DEVELOPMENT.

    (a) Combined Heat and Power System.--Section 48(a) of the Internal 
Revenue Code of 1986 is amended--
            (1) in paragraph (3)(A)--
                    (A) in clause (i), by striking ``or'' at the end;
                    (B) in clause (ii) by striking the comma at the end 
                and inserting ``, or''; and
                    (C) by inserting after clause (ii) the following:
                            ``(iii) combined heat and power system 
                        property,'';
            (2) by redesignating paragraph (4) as paragraph (5); and
            (3) by inserting after paragraph (3) the following new 
        paragraph:
            ``(4) Combined heat and power system property.--For 
        purposes of this subsection--
                    ``(A) Combined heat and power system property.--
                            ``(i) In general.--The term `combined heat 
                        and power system property' means property 
                        comprising a system--
                                    ``(I) 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),
                                    ``(II) which has an electrical 
                                capacity of no more than 50,000 
                                kilowatts or a mechanical energy 
                                capacity of more than 67,051 horsepower 
                                or an equivalent combination of 
                                electrical and mechanical energy 
                                capacities,
                                    ``(III) which produces at least 20 
                                percent of its total useful energy in 
                                the form of thermal energy, and at 
                                least 15 percent of its total useful 
                                energy in the form of electrical or 
                                mechanical power (or combination 
                                thereof),
                                    ``(IV) the energy efficiency 
                                percentage of which exceeds 60 percent, 
                                and
                                    ``(V) which is placed in service 
                                after December 31, 2005, and before 
                                January 1, 2010.
                            ``(ii) Exclusion.--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.
                    ``(B) Special rules.--
                            ``(i) 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 
                        rankin, stirling, or kalina heat engine 
                        systems, subparagraph (A)(i) shall be applied 
                        without regard to subclauses (III) and (IV).
                            ``(ii) Energy efficiency percentage.--For 
                        purposes of subparagraph (A)(i)(IV), 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 higher heating value of the primary 
                                fuel source for the system.
                            ``(iii) Determinations made on btu basis.--
                        The energy efficiency percentage and the 
                        percentages under subparagraph (A)(i)(III) 
                        shall be determined on a Btu basis.
                            ``(iv) Exception.--The matter in paragraph 
                        (3) which follows subparagraph (D) shall not 
                        apply to combined heat and power system 
                        property.
                    ``(C) Systems using bagasse or other biomass.--If a 
                system is designed to use bagasse or other biomass 
                (including wood chips, wood waste, and bark) for at 
                least 90 percent of the energy source--
                            ``(i) subparagraph (A)(i)(IV) shall not 
                        apply, and
                            ``(ii) 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 
                        subparagraph) as the energy efficiency 
                        percentage of such system bears to 60 
                        percent.''.
    (b) Conforming Amendments.--Section 29(b)(3)(A)(i)(III) of such 
Code is amended by striking ``section 48(a)(4)(C)'' and inserting 
``section 48(a)(5)(C)''.
    (c) Effective Date.--The amendments made by this section 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).

SEC. 3. SOLAR ENERGY INCENTIVES.

    (a) Business Consumer Credit.--
            (1) Energy percentage.--Section 48(a)(2) of the Internal 
        Revenue Code of 1986 (relating to energy percentage) is amended 
        by striking subparagraph (A) and inserting the following:
                    ``(A) In general.--The energy percentage is--
                            ``(i) for geothermal property, 10 percent, 
                        and
                            ``(ii) for solar equipment--
                                    ``(I) 30 percent during taxable 
                                years ending after December 31, 2005, 
                                and before January 1, 2011, and
                                    ``(II) 10 percent during taxable 
                                years ending after December 31, 2010.
            (2) Energy property.--Section 48(a)(3)(A) of such Code 
        (defining energy property) is amended by striking clause (i) 
        and inserting the following:
                            ``(i) equipment which uses solar energy to 
                        generate electricity for use in a structure, to 
                        heat or cool (or provide hot water for use in) 
                        a structure, to illuminate the inside of a 
                        structure using fiber-optic distributed 
                        sunlight or to provide solar process heat, 
                        excepting property used to generate energy for 
                        the purposes of heating a swimming pool,''.
    (b) Residential Consumer Credit.--Subpart A of part IV of 
subchapter A of chapter 1 of the Internal Revenue Code of 1986 is 
amended by inserting after section 25B the following:

``SEC. 25C. RENEWABLE ENERGY EQUIPMENT CREDITS.

    ``(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, in the case of qualified photovoltaic property 
expenditures or qualified solar heating property expenditures made by 
the taxpayer during such year, an amount equal to 30 percent of so much 
of such expenditures as do not exceed $7,500.
    ``(b) Definitions.--For purposes of this section:
            ``(1) Property expenditure.--
                    ``(A) In general.--The term `property expenditure' 
                means any expenditure for a property.
                    ``(B) Inclusions.--
                            ``(i) Labor costs.--The term `property 
                        expenditure' includes the cost of any labor 
                        that is properly allocable to the onsite 
                        preparation, assembly, or original installation 
                        of the property described in paragraph (2) or 
                        (3), including the cost of piping or wiring to 
                        interconnect such property to the dwelling 
                        unit.
                            ``(ii) Solar panels.--No expenditure 
                        relating to a solar panel or other property 
                        installed as a roof (or portion thereof) shall 
                        fail to be treated as a property expenditure 
                        solely because it constitutes a structural 
                        component of the structure on which it is 
                        installed.
            ``(2) Qualified photovoltaic property expenditure.--The 
        term `qualified photovoltaic property expenditure' means any 
        property expenditure for property which uses solar energy to 
        generate electricity for use in a dwelling unit through the 
        photovoltaic effect.
            ``(3) Qualified solar heating property expenditure.--
                    ``(A) In general.--The term `qualified solar 
                heating property expenditure' means any property 
                expenditure for property which uses solar energy to 
                heat or cool (or provide hot water for use in) a 
                dwelling unit.
                    ``(B) Exclusion.--The term `qualified solar heating 
                property expenditure' does not include an expenditure 
                for property which uses solar energy to heat or cool a 
                swimming pool.
    ``(c) Special Rules.--
            ``(1) Joint occupancy.--In the case of any dwelling unit 
        which is jointly occupied and used during any calendar year as 
        a residence by 2 or more individuals the following shall apply 
        separately with respect to qualified solar heating property 
        expenditures and qualified photovoltaic property expenditures:
                    ``(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 that section), the 
        individual shall be treated as having made such 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 such individual 
                owns, such individual shall be treated as having made 
                such individual's proportionate share of any 
                expenditures of such association.
                    ``(B) 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) 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 in connection with 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.--
                            ``(i) In general.--The amount of any 
                        expenditure shall be the cost of the 
                        expenditure.
                            ``(ii) Subsidized energy financing.--For 
                        purposes of determining the amount of 
                        expenditures, there shall not be taken into 
                        account expenditures which are made from 
                        subsidized energy financing (as defined in 
                        section 48(a)(5)(A)).
    ``(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) Limitations.--No credit shall be allowed under this section 
for an item of property unless--
            ``(1) in the case of solar heating property, the property 
        meets all applicable health and safety standards and 
        requirements imposed by any State or local permitting 
        authority, and
            ``(2) in the case of a photovoltaic property, the property 
        meets all appropriate fire and electric code requirements.
    ``(f) Termination.--This section shall not apply to expenditures 
made after December 31, 2010.''.
    (c) Production Tax Credit for Utility-Scale Solar.--Paragraph (4) 
of section 45(d) of the Internal Revenue Code of 1986 (relating to 
qualified facilities) is amended to read as follows:
            ``(4) Geothermal or solar energy facility.--In the case of 
        a facility using geothermal or solar energy to produce 
        electricity, the term `qualified facility' means any facility 
        owned by the taxpayer which is originally placed in service 
        after December 31, 2005, and before December 31, 2010.''.
    (d) Conforming Amendments.--
            (1) Subsection (a) of section 1016 of the Internal Revenue 
        Code of 1986 is amended--
                    (A) by striking ``and'' at the end of paragraph 
                (30);
                    (B) by striking the period at the end of paragraph 
                (31) and inserting ``, and''; and
                    (C) by adding at the end the following new 
                paragraph:
            ``(32) 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.''.
            (2) The table of sections for subpart A of part IV of 
        subchapter A of chapter 1 of such Code is amended by inserting 
        after the item relating to section 25C the following new item:

``Sec. 25C. Renewable energy equipment credits.''.
    (e) Effective Date.--The amendments made by this section shall 
apply to property placed in service after December 31, 2005, in taxable 
years ending after such date.

SEC. 4. ENERGY EFFICIENCY TAX PROVISIONS.

    (a) Credit for Residential Energy Efficient Property.--
            (1) 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:

``SEC. 25C. RESIDENTIAL ENERGY EFFICIENT PROPERTY.

    ``(a) Allowance of Credit.--In the case of an individual, there 
shall be allowed as a credit against the tax imposed by this chapter 
for the taxable year an amount equal to 20 percent of the qualified 
fuel cell property expenditures made by the taxpayer during such year.
    ``(b) Limitations.--
            ``(1) Maximum credit.--
                    ``(A) In general.--The credit allowed under 
                subsection (a) shall not exceed $500 for each 0.5 
                kilowatt of capacity of property described in 
                subsection (c).
                    ``(B) Prior expenditures by taxpayer on same 
                residence taken into account.--In determining the 
                amount of the credit allowed to a taxpayer with respect 
                to any dwelling unit under this section, the dollar 
                amount under subparagraph (A)(i) with respect to each 
                type of property described in such subparagraph shall 
                be reduced by the credit allowed to the taxpayer under 
                this section with respect to such property for all 
                preceding taxable years with respect to such dwelling 
                unit.
            ``(2) Property standards.--No credit shall be allowed under 
        this section for an item of property unless--
                    ``(A) the original use of such property commences 
                with the taxpayer,
                    ``(B) such property 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, and
                    ``(D) such property meets--
                            ``(i) the performance and quality standards 
                        (if any) which have been prescribed by the 
                        Secretary by regulations (after consultation 
                        with the Secretary of Energy), and
                            ``(ii) appropriate fire and electric code 
                        requirements.
    ``(c) Definitions.--For purposes of this section--
            ``(1) Qualified fuel cell property expenditure.--The term 
        `qualified fuel cell property expenditure' means an expenditure 
        for any qualified fuel cell property (as defined in section 
        48(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.--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)).
    ``(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, 2006 (December 31, 
2008, with respect to qualified photovoltaic property expenditures).''.
            (2) Conforming amendments.--
                    (A) Section 1016(a) of the Internal Revenue Code of 
                1986 is amended--
                            (i) by striking ``and'' at the end of 
                        paragraph (30);
                            (ii) by striking the period at the end of 
                        paragraph (31) and inserting ``, and''; and
                            (iii) by adding at the end the following:
            ``(32) to the extent provided in section 25C(e), in the 
        case of amounts with respect to which a credit has been allowed 
        under section 25C.''.
                    (B) The table of sections for subpart A of part IV 
                of subchapter A of chapter 1 of such Code is amended by 
                inserting after the item relating to section 25B the 
                following:

                              ``Sec. 25C. Residential energy efficient 
                                        property.''.
            (3) Effective date.--The amendments made by this section 
        shall apply to taxable years ending after December 31, 2005.
    (b) Extension of Credit for Electricity Produced From Certain 
Renewable Resources.--
            (1) Extension.--Section 45(d) of the Internal Revenue Code 
        of 1986 (relating to qualified facilities) is amended by 
        striking ``2006'' each place it appears and inserting ``2007''.
            (2) Coordination with other credits.--Paragraph (9) of 
        section 45(e) of the Internal Revenue Code of 1986 (relating to 
        definitions and special rules) is amended to read as follows:
            ``(9) Coordination with other credits.--The term `qualified 
        facility' shall not include--
                    ``(A) any property with respect to which a credit 
                is allowed under section 25C, and
                    ``(B) any facility the production from which is 
                allowed as a credit under section 29,
        for the taxable year or any prior taxable year.''.
            (3) Effective date.--The amendments made by this section 
        shall apply to electricity produced and sold after the date of 
        the enactment of this Act, in taxable years ending after that 
        date.
            (4) GAO study and report.--
                    (A) In general.--The Comptroller General of the 
                United States shall conduct a study on the market 
                viability of producing electricity from resources with 
                respect to which credit is allowed under section 45 of 
                the Internal Revenue Code of 1986.
                    (B) Open-loop biomass and municipal solid waste.--
                In the case of open-loop biomass and municipal solid 
                waste resources, the study under paragraph (1) shall 
                take into account savings associated with not having to 
                dispose of those resources.
                    (C) Environmental impact.--In conducting the study 
                under paragraph (1), the Comptroller General of the 
                United States shall estimate the dollar value of the 
                environmental impact of producing electricity from 
                open-loop biomass and municipal solid waste relative to 
                producing electricity from fossil fuels using the 
                latest generation of technology.
                    (D) Report.--Not later than June 30, 2006, the 
                Comptroller General of the United States shall submit 
                to the Committee on Ways and Means of the House of 
                Representatives and the Committee on Finance of the 
                Senate a report describing the results of the study 
                under paragraph (1).
    (c) Credit for Business Installation of Qualified Fuel Cells.--
            (1) In general.--Section 48 of the Internal Revenue Code of 
        1986 (relating to energy credit) is amended--
                    (A) in subsection (a)--
                            (i) in paragraph (1), by inserting ``except 
                        as provided in subsection (c)(2),'' before 
                        ``the energy'';
                            (ii) in paragraph (2), by striking 
                        subparagraph (A) and inserting the following:
                    ``(A) In general.--The energy percentage is--
                            ``(i) in the case of qualified fuel cell 
                        property, 20 percent, and
                            ``(ii) in the case of any other energy 
                        property, 10 percent.''; and
                            (iii) in paragraph (3)(A)--
                                    (I) in clause (i), by striking 
                                ``or'' at the end;
                                    (II) in clause (ii), by adding 
                                ``or'' after the comma at the end; and
                                    (III) by inserting at the end the 
                                following:
                            ``(iii) qualified fuel cell property,''; 
                        and
                    (B) by adding at the end the following:
    ``(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, 2006.''.
            (2) 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).
    (d) Credit for Energy Efficiency Improvements to Existing Homes.--
            (1) 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) (as amended by this Act) is 
        amended by inserting after section 25C the following:

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

    ``(a) Allowance of Credit.--In the case of an individual, there 
shall be allowed as a credit against the tax imposed by this chapter 
for the taxable year an amount equal to 20 percent of the amount paid 
or incurred by the taxpayer for qualified energy efficiency 
improvements installed during such taxable year.
    ``(b) Limitations.--
            ``(1) Maximum credit.--The credit allowed by this section 
        with respect to a dwelling unit shall not exceed $2,000.
            ``(2) Prior credit amounts for taxpayer on same dwelling 
        taken into account.--If a credit was allowed to the taxpayer 
        under subsection (a) with respect to a dwelling unit in 1 or 
        more prior taxable years, the amount of the credit otherwise 
        allowable for the taxable year with respect to that dwelling 
        unit shall be reduced by the sum of the credits allowed under 
        subsection (a) to the taxpayer with respect to the dwelling 
        unit for all prior taxable years.
    ``(c) Qualified Energy Efficiency Improvements.--For purposes of 
this section, the term `qualified energy efficiency improvements' means 
any energy efficient building envelope component which meets the 
prescriptive criteria for such component established by the 2000 
International Energy Conservation Code, as such Code (including 
supplements) is in effect on the date of the enactment of this section 
(or, in the case of a metal roof with appropriate pigmented coatings 
which meet the Energy Star program requirements), if--
            ``(1) such component is installed in or on a dwelling 
        unit--
                    ``(A) located in the United States,
                    ``(B) owned and used by the taxpayer as the 
                taxpayer's principal residence (within the meaning of 
                section 121), and
                    ``(C) which has not been treated as a qualified new 
                energy efficient home for purposes of any credit 
                allowed under section 45J,
            ``(2) the original use of such component commences with the 
        taxpayer, and
            ``(3) such component reasonably can be expected to remain 
        in use for at least 5 years.
If the aggregate cost of such components with respect to any dwelling 
unit exceeds $1,000, such components shall be treated as qualified 
energy efficiency improvements only if such components are also 
certified in accordance with subsection (d) as meeting such 
prescriptive criteria.
    ``(d) Certification.--The certification described in subsection (c) 
shall be--
            ``(1) determined on the basis of the technical 
        specifications or applicable ratings (including product 
        labeling requirements) for the measurement of energy efficiency 
        (based upon energy use or building envelope component 
        performance) for the energy efficient building envelope 
        component,
            ``(2) provided by a local building regulatory authority, a 
        utility, a manufactured home production inspection primary 
        inspection agency (IPIA), or an accredited home energy rating 
        system provider who is accredited by or otherwise authorized to 
        use approved energy performance measurement methods by the 
        Residential Energy Services Network (RESNET), and
            ``(3) made in writing in a manner which specifies in 
        readily verifiable fashion the energy efficient building 
        envelope components installed and their respective energy 
        efficiency levels.
    ``(e) Definitions and Special Rules.--For purposes of this 
section--
            ``(1) Building envelope component.--The term `building 
        envelope component' means--
                    ``(A) any insulation material or system which is 
                specifically and primarily designed to reduce the heat 
                loss or gain of a dwelling unit when installed in or on 
                such dwelling unit,
                    ``(B) exterior windows (including skylights),
                    ``(C) exterior doors, and
                    ``(D) any metal roof installed on a dwelling unit, 
                but only if such roof has appropriate pigmented 
                coatings which are specifically and primarily designed 
                to reduce the heat gain of such dwelling unit.
            ``(2) Manufactured homes included.--The term `dwelling 
        unit' includes a manufactured home which conforms to Federal 
        Manufactured Home Construction and Safety Standards (section 
        3280 of title 24, Code of Federal Regulations).
            ``(3) Application of rules.--Rules similar to the rules 
        under paragraphs (3), (4), and (5) of section 25C(d) shall 
        apply.
    ``(f) Basis Adjustment.--For purposes of this subtitle, if a credit 
is allowed under this section for any expenditure with respect to any 
property, the increase in the basis of such property which would (but 
for this subsection) result from such expenditure shall be reduced by 
the amount of the credit so allowed.
    ``(g) Application of Section.--This section shall apply to 
qualified energy efficiency improvements installed after December 31, 
2005, and before January 1, 2007.''.
            (2) Conforming amendments.--
                    (A) Subsection (a) of section 1016 of the Internal 
                Revenue Code of 1986 (as amended by this Act) is 
                amended--
                            (i) in paragraph (31), by striking ``and'' 
                        at the end;
                            (ii) in paragraph (32), by striking the 
                        period at the end and inserting ``, and''; and
                            (iii) by adding at the end the following:
            ``(33) to the extent provided in section 25D(f), in the 
        case of amounts with respect to which a credit has been allowed 
        under section 25D.''.
                    (B) The table of sections for subpart A of part IV 
                of subchapter A of chapter 1 of such Code (as amended 
                by this Act) is amended by inserting after the item 
                relating to section 25C the following:

                              ``Sec. 25D. Energy efficiency 
                                        improvements to existing 
                                        homes.''.
            (3) Effective date.--The amendments made by this section 
        shall apply to taxable years ending after December 31, 2005.
    (e) Credit for Construction of New Energy Efficient Homes.--
            (1) 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:

``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)(D), $1,000, and
                            ``(ii) in the case of a dwelling unit 
                        described in subsection (c)(3)(D)(ii), $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 December 31, 2005,
                    ``(C) the original use of which, after such 
                construction, is reasonably expected to be as a 
                residence by the person who acquires such dwelling unit 
                from the eligible contractor,
                    ``(D) 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 2000 International Energy Conservation 
                        Code, as such Code (including supplements) is 
                        in effect on the date of the enactment of this 
                        section, 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, or
                            ``(iii) a manufactured home which--
                                    ``(I) conforms to Federal 
                                Manufactured Home Construction and 
                                Safety Standards (section 3280 of title 
                                24, Code of Federal Regulations), and
                                    ``(II) meets the applicable 
                                standards required by the Administrator 
                                of the Environmental Protection Agency 
                                under the Energy Star Labeled Homes 
                                program.
            ``(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 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)(D) shall be determined in accordance with 
        guidance prescribed by the Secretary. Such guidance shall 
        specify procedures and methods for calculating energy and cost 
        savings.
            ``(2) Form.--A certification described in subsection 
        (c)(3)(D) shall be made in writing--
                    ``(A) 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, and
                    ``(B) in the case of a qualified new energy 
                efficient home which is a manufactured home, 
                accompanied by such documentation as required by the 
                Administrator of the Environmental Protection Agency 
                under the Energy Star Labeled Homes program.
    ``(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) Application of Section.--Subsection (a) shall apply to 
qualified new energy efficient homes acquired during the period 
beginning on January 1, 2006, and ending on December 31, 2008.''.
            (2) Credit made part of general business credit.--Section 
        38(b) of the Internal Revenue Code of 1986 (relating to current 
        year business credit) is amended--
                    (A) in paragraph (18), by striking ``plus'' at the 
                end;
                    (B) in paragraph (19), by striking the period at 
                the end and inserting ``, plus''; and
                    (C) by adding at the end the following:
            ``(20) the new energy efficient home credit determined 
        under section 45J(a).''.
            (3) Basis adjustment.--Section 1016(a) of the Internal 
        Revenue Code of 1986 (as amended by this Act) is amended--
                    (A) in paragraph (32), by striking ``and'' at the 
                end;
                    (B) in paragraph (33), by striking the period at 
                the end and inserting ``, and''; and
                    (C) by adding at the end the following:
            ``(34) 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.''.
            (4) Deduction for certain unused business credits.--Section 
        196(c) of the Internal Revenue Code of 1986 (defining qualified 
        business credits) is amended--
                    (A) in paragraph (11), by striking ``and'' at the 
                end;
                    (B) in paragraph (12), by striking the period at 
                the end and inserting ``, and''; and
                    (C) by adding after paragraph (12) the following:
            ``(13) the new energy efficient home credit determined 
        under section 45J(a).''.
            (5) 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:

                              ``Sec. 45J. New energy efficient home 
                                        credit.''.
            (6) Effective date.--The amendments made by this section 
        shall apply to taxable years ending after December 31, 2005.
    (f) Credit for Energy Efficient Appliances.--
            (1) 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) (as amended by this Act) is amended 
        by adding at the end the following:

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

    ``(a) Allowance of Credit.--For purposes of section 38, the energy 
efficient appliance credit determined under this section for the 
taxable year is an amount equal to the sum of--
            ``(1) the tier I appliance amount, and
            ``(2) the tier II appliance amount,

with respect to qualified energy efficient appliances produced by the 
taxpayer during the calendar year ending with or within the taxable 
year.
    ``(b) Appliance Amounts.--For purposes of subsection (a)--
            ``(1) Tier i appliance amount.--The tier I appliance amount 
        is equal to--
                    ``(A) $100, multiplied by
                    ``(B) an amount (rounded to the nearest whole 
                number) equal to the applicable percentage of the 
                eligible production.
            ``(2) Tier ii appliance amount.--The tier II appliance 
        amount is equal to $150, multiplied by an amount equal to the 
        eligible production reduced by the amount determined under 
        paragraph (1)(B).
            ``(3) Applicable percentage.--The applicable percentage is 
        the percentage determined by dividing the tier I appliances 
        produced by the taxpayer during the calendar year by the sum of 
        the tier I and tier II appliances so produced.
            ``(4) Eligible production.--The eligible production of 
        qualified energy efficient appliances by the taxpayer for any 
        calendar year is the excess of--
                    ``(A) the number of such appliances which are 
                produced by the taxpayer during such calendar year, 
                over
                    ``(B) 110 percent of the average annual number of 
                such appliances which were produced by the taxpayer (or 
                any predecessor) during the preceding 3-calendar year 
                period.
    ``(c) Qualified Energy Efficient Appliance.--For purposes of this 
section--
            ``(1) In general.--The term `qualified energy efficient 
        appliance' means any tier I appliance or tier II appliance 
        which is produced in the United States.
            ``(2) Tier i appliance.--The term `tier I appliance' 
        means--
                    ``(A) a clothes washer which is produced with at 
                least a 1.50 MEF, and
                    ``(B) a refrigerator which consumes at least 15 
                percent (20 percent in the case of a refrigerator 
                produced after 2006) less kilowatt hours per year than 
                the energy conservation standards for refrigerators 
                promulgated by the Department of Energy and effective 
                on July 1, 2001.
            ``(3) Tier ii appliance.--The term `tier II appliance' 
        means a refrigerator produced before 2007 which consumes at 
        least 20 percent less kilowatt hours per year than the energy 
        conservation standards described in paragraph (2)(B).
            ``(4) Clothes washer.--The term `clothes washer' means a 
        residential clothes washer, including a residential style coin 
        operated washer.
            ``(5) Refrigerator.--The term `refrigerator' means an 
        automatic defrost refrigerator-freezer which has an internal 
        volume of at least 16.5 cubic feet.
            ``(6) MEF.--The term `MEF' means Modified Energy Factor (as 
        determined by the Secretary of Energy).
            ``(7) Produced.--The term `produced' includes manufactured.
    ``(d) Limitation on Maximum Credit.--
            ``(1) In general.--The amount of credit allowed under 
        subsection (a) with respect to a taxpayer for any taxable year 
        shall not exceed $60,000,000, reduced by the amount of the 
        credit allowed under subsection (a) to the taxpayer (or any 
        predecessor) for any prior taxable year.
            ``(2) 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 for which the credit 
        is determined.
            ``(3) Gross receipts.--For purposes of this subsection, the 
        rules of paragraphs (2) and (3) of section 448(c) shall apply.
    ``(e) 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 groups.--
                    ``(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 manufacturer.
                    ``(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.
    ``(f) Verification.--The taxpayer shall submit such information or 
certification as the Secretary, after consultation with the Secretary 
of Energy, determines necessary to claim the credit amount under 
subsection (a).
    ``(g) Termination.--This section shall not apply with respect to 
appliances produced after December 31, 2007.''.
            (2) Credit made part of general business credit.--Section 
        38(b) of the Internal Revenue Code of 1986 (relating to current 
        year business credit) (as amended by this Act) is amended--
                    (A) in paragraph (19), by striking ``plus'' at the 
                end;
                    (B) in paragraph (20), by striking the period at 
                the end and inserting ``, plus''; and
                    (C) by adding at the end the following:
            ``(21) the energy efficient appliance credit determined 
        under section 45K(a).''.
            (3) 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 (as amended by this Act) is amended by 
        adding at the end the following:

                              ``Sec. 45K. Energy efficient appliance 
                                        credit.''.
            (4) Effective date.--The amendments made by this section 
        shall apply to appliances produced after December 31, 2005, in 
        taxable years ending after such date.
    (g) Energy Efficient Commercial Buildings Deduction.--
            (1) In general.--Part VI of subchapter B of chapter 1 of 
        the Internal Revenue Code of 1986 (relating to itemized 
        deductions for individuals and corporations) is amended by 
        inserting after section 179B the following:

``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) $1.50, 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 a building--
                            ``(i) which is located in the United 
                        States, and
                            ``(ii) which is the type of structure to 
                        which the Standard 90.1-2001 is applicable,
                    ``(B) which is installed as part of--
                            ``(i) the 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)(4) as being installed as part of a plan 
                designed to reduce the total annual energy and power 
                costs with respect to the 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).
            ``(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), in the case of a building placed in service on or 
                before the date of the enactment of this section, if--
                            ``(i) the requirement of subsection 
                        (c)(1)(C) is not met, but
                            ``(ii) there is a certification in 
                        accordance with subsection (d)(4) 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 
                `$.50' for `$1.50'.
                    ``(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 cost for purposes of this 
        section.
            ``(3) 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.
            ``(4) 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--
                            ``(i) comparable, given the difference 
                        between commercial and residential buildings, 
                        to the requirements in the Mortgage Industry 
                        National Accreditation Procedures for Home 
                        Energy Rating Systems, and
                            ``(ii) fuel neutral such that the same 
                        energy efficiency measures allow a building to 
                        be eligible for the deduction under this 
                        section regardless of whether such building 
                        uses a gas or oil furnace or boiler, an 
                        electric heat pump, or other fuel source.
                    ``(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) 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.
    ``(h) Termination.--This section shall not apply with respect to 
property placed in service after December 31, 2007.''.
            (2) Conforming amendments.--
                    (A) Section 1016(a) of the Internal Revenue Code of 
                1986 (as amended by this Act) is amended--
                            (i) in paragraph (33), by striking ``and'' 
                        at the end;
                            (ii) in paragraph (34), by striking the 
                        period at the end and inserting ``, and''; and
                            (iii) by adding at the end the following:
            ``(35) to the extent provided in section 179B(e).''.
                    (B) Paragraphs (2)(C) and (3)(C) of section 1245(a) 
                of such Code are amended by inserting ``179C,'' after 
                ``179B,'' each place it appears.
                    (C) Section 1250(b)(3) of such Code is amended by 
                inserting before the period at the end of the first 
                sentence ``or by section 179C''.
                    (D) Section 263(a)(1) of such Code is amended--
                            (i) in subparagraph (H), by striking ``or'' 
                        at the end;
                            (ii) in subparagraph (I), by striking the 
                        period at the end and inserting ``, or''; and
                            (iii) by inserting after subparagraph (I) 
                        the following:
                    ``(J) expenditures for which a deduction is allowed 
                under section 179C.''.
                    (E) Section 312(k)(3)(B) of such Code (including 
                the heading of that section) is amended by striking 
                ``179A, or 179B'' each place it appears and inserting 
                ``, 179A, 179B, or 179C''.
            (3) Clerical amendment.--The table of sections for part VI 
        of subchapter B of chapter 1 of the Internal Revenue Code of 
        1986 is amended by inserting after section 179B the following:

                              ``Sec. 179C. Energy efficient commercial 
                                        buildings deduction.''.
            (4) 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.
    (h) Three-Year Applicable Recovery Period for Depreciation of 
Qualified Energy Management Devices.--
            (1) In general.--Section 168 of the Internal Revenue Code 
        of 1986 (relating to accelerated cost recovery system) is 
        amended--
                    (A) in subsection (e)(3)(A)--
                            (i) in clause (ii), by striking ``and'' at 
                        the end;
                            (ii) in clause (iii), by striking the 
                        period at the end and inserting ``, and''; and
                            (iii) by adding at the end the following:
                            ``(iv) any qualified energy management 
                        device.'';
                    (B) in subsection (i), by inserting at the end the 
                following:
            ``(17) Qualified energy management device.--
                    ``(A) In general.--The term `qualified energy 
                management device' means any energy management device 
                which is placed in service before January 1, 2008, by a 
                taxpayer who is a supplier of electric energy or a 
                provider of electric energy services.
                    ``(B) Energy management device.--For purposes of 
                subparagraph (A), the term `energy management device' 
                means any meter or metering device which is used by the 
                taxpayer--
                            ``(i) to measure and record electricity 
                        usage data on a time-differentiated basis in at 
                        least 4 separate time segments per day, and
                            ``(ii) to provide such data on at least a 
                        monthly basis to both consumers and the 
                        taxpayer.''; and
                    (C) in the table under subsection (g)(3)(B), by 
                inserting after the item relating to subparagraph 
                (A)(iii) the following:

``(A)(iv)......................................................   20''.
            (2) 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. 5. CREDIT FOR INVESTMENT IN QUALIFYING GASIFICATION COMBINED CYCLE 
              TECHNOLOGIES.

    (a) Allowance of Qualifying Gasification Combined Cycle Technology 
Facility Credit.--Section 46 (relating to the amount of credit) is 
amended by striking ``and'' at the end of paragraph (1), by striking 
the period at the end of paragraph (2) and inserting ``, and'', and by 
adding at the end the following new paragraph:
            ``(3) the qualifying gasification combined cycle technology 
        facility credit.''.
    (b) Amount of Qualifying Gasification Combined Cycle Technology 
Facility Credit.--Subpart E of part IV of subchapter A of chapter 1 
(relating to rules for computing investment credit) is amended by 
inserting after section 48 the following new section:

``SEC. 48A. QUALIFYING GASIFICATION COMBINED CYCLE TECHNOLOGY FACILITY 
              CREDIT.

    ``(a) In General.--For purposes of section 46, the qualifying 
gasification combined cycle technology facility credit for any taxable 
year is an amount equal to 15 percent of the qualified investment in a 
qualifying gasification combined cycle technology facility for such 
taxable year, except that the credit shall be 20 percent if the 
facility is a poly-generation facility.
    ``(b) Qualifying Gasification Combined Cycle Technology Facility.--
For purposes of subsection (a), the term `qualifying gasification 
combined cycle technology facility' means an integrated gasification 
combined cycle technology facility of the taxpayer--
            ``(1) in the case of a facility first placed in service 
        after September 30, 2005 and before September 30, 2013, the 
        original use of which commences with the taxpayer, or
            ``(2) in the case of the retrofitting or repowering of a 
        facility first placed in service before October 1, 2005, the 
        retrofitting or repowering of which is completed by the 
        taxpayer after September 30, 2005 and before September 30, 
        2013.
    ``(c) Qualified Investment.--For purposes of subsection (a), the 
term `qualified investment' means, with respect to any taxable year, 
the basis of a qualifying gasification combined cycle technology 
facility, including all equipment and other tangible personal property 
incorporated into and used in a gasification combined cycle technology 
facility or poly-generating facility, as appropriate, all transmission 
equipment employed specifically to serve and located at the site of a 
gasification combined cycle technology facility or poly-generating 
facility, as appropriate, and all components added to capture, separate 
on a long term basis, isolate, or remove greenhouse gases that result 
from the generation of electricity from a gasification combined cycle 
technology facility or poly-generating facility, placed in service by 
the taxpayer during such taxable year (in the case of a facility 
described in subsection (b)(2), only that portion of the basis of such 
facility which is properly attributable to the retrofitting or 
repowering of such facility.)
    ``(d) Qualified Progress Expenditures.--
            ``(1) Increase in qualified investment.--In the case of a 
        taxpayer who has made an election under paragraph (5), the 
        amount of the qualified investment of such taxpayer for the 
        taxable year (determined under subsection (g) without regard to 
        this subsection) shall be increased by an amount equal to the 
        aggregate of each qualified progress expenditure for the 
        taxable year with respect to progress expenditure property.
            ``(2) Progress expenditure property defined.--For purposes 
        of this subsection, the term `progress expenditure property' 
        means any property being constructed by or for the taxpayer and 
        which it is reasonable to believe will qualify as a qualifying 
        gasification combined cycle technology facility which is being 
        constructed by or for the taxpayer when it is placed in 
        service.
            ``(3) Qualified progress expenditures defined.--For 
        purposes of this subsection--
                    ``(A) Self-constructed property.--In the case of 
                any self-constructed property, the term `qualified 
                progress expenditures' means the amount which, for 
                purposes of this subpart, is properly chargeable 
                (during such taxable year) to capital account with 
                respect to such property.
                    ``(B) Nonself-constructed property.--In the case of 
                nonself-constructed property, the term `qualified 
                progress expenditures' means the amount paid during the 
                taxable year to another person for the construction of 
                such property.
            ``(4) Other definitions.--For purposes of this subsection--
                    ``(A) Self-constructed property.--The term `self-
                constructed property' means property for which it is 
                reasonable to believe that more than half of the 
                construction expenditures will be made directly by the 
                taxpayer.
                    ``(B) Nonself-constructed property.--The term 
                `nonself-constructed property' means property which is 
                not self-constructed property.
                    ``(C) Construction, etc.--The term `construction' 
                includes reconstruction and erection, and the term 
                `constructed' includes reconstructed and erected.
                    ``(D) Only construction of gasification combined 
                cycle technology facility to be taken into account.--
                Construction shall be taken into account only if, for 
                purposes of this subpart, expenditures therefore are 
                properly chargeable to capital account with respect to 
                the property.
            ``(5) Election.--An election under this subsection may be 
        made at such time and in such manner as the Secretary may by 
        regulations prescribe. Such an election shall apply to the 
        taxable year for which made and to all subsequent taxable 
        years. Such an election, once made, may not be revoked except 
        with the consent of the Secretary.
    ``(e) Coordination With Other Credits.--This section shall not 
apply to any property with respect to which the rehabilitation credit 
under section 47 or the energy credit under section 48 is allowed 
unless the taxpayer elects to waive the application of such credit to 
such property.
    ``(f) Carryforward of Unused Credit.--A taxpayer may elect to use 
all or a portion of the credit calculated under subsection (a) in one 
or more succeeding taxable years.
    ``(g) Definitions.--
            ``(1) For purposes of this section, the term `gasification 
        combined cycle technology facility' means any combination of 
        equipment, including all related power generation equipment, 
        (A) used at a single location to convert coal or residuals into 
        synthesis gas that is then used as a fuel to generate 
        electricity; (B) that is carbon capture ready; (C) to which 
        depreciation (or amortization in lieu of depreciation) is 
        allowable; and (D) that can meet a nitrogen oxides emissions 
        rate of 0.06 lb/mmBtu and a sulfur dioxide emissions rate of 
        0.08 lb/mmBtu.
            ``(2) For purposes of this section, the term `poly-
        generating facility' means a gasification combined cycle 
        technology facility that also produces commercially useful fuel 
        and/or chemical products and where no more than 50 percent or 
        less than 20 percent of the energy content (BTUs/hr) of the 
        gasification process is used to produce such other fuels or 
        chemicals.
            ``(3) For purposes of this section, the term `carbon 
        capture ready' means a gasification combined cycle technology 
        facility that can have components added that can capture, 
        separate on a long term basis, isolate, or remove greenhouse 
        gases that result from the generation of electricity.''.
    (c) Recapture and Basis Adjustment.--
            (1) Section 50(a) of the Internal Revenue Code of 1986 
        (relating to other special rules) is amended by adding at the 
        end the following new paragraph:
            ``(6) Special rules relating to qualifying gasification 
        combined cycle technology facility.--For purposes of applying 
        this subsection in the case of any credit allowable by reason 
        of section 48A, the following shall apply:
                    ``(A) General rule.--In lieu of the amount of the 
                increase in tax under paragraph (1), the increase in 
                tax shall be an amount equal to the investment tax 
                credit allowed under section 38 for all prior taxable 
                years with respect to a qualifying gasification 
                combined cycle technology facility (as defined by 
                section 48A(g)(1)) multiplied by a fraction whose 
                numerator is the number of years remaining to fully 
                depreciate under this title the qualifying gasification 
                combined cycle technology facility disposed of, and 
                whose denominator is the total number of years over 
                which such facility would otherwise have been subject 
                to depreciation. For purposes of the preceding 
                sentence, the year of disposition of the qualifying 
                gasification combined cycle technology facility shall 
                be treated as a year of remaining depreciation.
                    ``(B) Property ceases to qualify for progress 
                expenditures.--Rules similar to the rules of paragraph 
                (2) shall apply in the case of qualified progress 
                expenditures for a qualifying gasification combined 
                cycle technology facility under section 48A, except 
                that the amount of the increase in tax under 
                subparagraph (A) of this paragraph shall be substituted 
                for the amount described in such paragraph (2).
                    ``(C) Application of paragraph.--This paragraph 
                shall be applied separately with respect to the credit 
                allowed under section 38 regarding a qualifying 
                gasification combined cycle technology facility.''.
            (2) Basis adjustment.--Section 50(c)(3) of the Internal 
        Revenue Code of 1986 is amended by adding ``or any gasification 
        combined cycle technology credit'' after ``any energy credit''.

SEC. 6. TREATMENT OF PERSONS NOT ABLE TO USE ENTIRE CREDIT.

    (a) In General.--Section 48A of the Internal Revenue Code of 1986, 
as added by this Act, is amended by adding at the end the following new 
subsection:
    ``(h) Treatment of Persons Not Able To Use Entire Credit.--
            ``(1) Allowance of credits.--
                    ``(A) In general.--Any credit allowable under this 
                section with respect to a facility owned by a person 
                described in subparagraph (B) may be transferred or 
                used as provided in this subsection, and the 
                determination as to whether the credit is allowable 
                shall be made without regard to the tax-exempt status 
                of the person.
                    ``(B) Persons described.--A person is described in 
                this subparagraph if the person is--
                            ``(i) an organization described in section 
                        501(c)(12)(C) and exempt from tax under section 
                        501(a),
                            ``(ii) an organization described in section 
                        1381(a)(2)(C),
                            ``(iii) a public utility (as defined in 
                        section 136(c)(2)(B)),
                            ``(iv) any State or political subdivision 
                        thereof, the District of Columbia, or any 
                        agency or instrumentality of any of the 
                        foregoing,
                            ``(v) any Indian tribal government (within 
                        the meaning of section 7871) or any agency or 
                        instrumentality thereof, or
                            ``(vi) the Tennessee Valley Authority.
            ``(2) Transfer of credit.--
                    ``(A) In general.--A person described in clause 
                (i), (ii), (iii), (iv), or (v) of paragraph (1)(B) may 
                transfer any credit to which paragraph (1)(A) applies 
                through an assignment to any other person not described 
                in paragraph (1)(B). Such transfer may be revoked only 
                with the consent of the Secretary.
                    ``(B) Regulations.--The Secretary shall prescribe 
                such regulations as necessary to insure that any credit 
                described in subparagraph (A) is claimed once and not 
                reassigned by such other person.
                    ``(C) Transfer proceeds treated as arising from 
                essential government function.--Any proceeds derived by 
                a person described in clause (iii), (iv), or (v) of 
                paragraph (1)(B) from the transfer of any credit under 
                subparagraph (A) shall be treated as arising from the 
                exercise of an essential government function.
            ``(3) Use of credit as an offset.--Notwithstanding any 
        other provision of law, in the case of a person described in 
        clause (i), (ii), or (v) of paragraph (1)(B), any credit to 
        which paragraph (1)(A) applies may be applied by such person, 
        to the extent provided by the Secretary of Agriculture, as a 
        prepayment of any loan, debt, or other obligation the entity 
        has incurred under subchapter I of chapter 31 of title 7 of the 
        Rural Electrification Act of 1936 (7 U.S.C. 901 et seq.), as in 
        effect on the date of the enactment of this section.
            ``(4) Use by tva.--
                    ``(A) In general.--Notwithstanding any other 
                provision of law, in the case of a person described in 
                paragraph (1)(B)(vi), any credit to which paragraph 
                (1)(A) applies may be applied as a credit against the 
                payments required to be made in any fiscal year under 
                section 15d(e) of the Tennessee Valley Authority Act of 
                1933 (16 U.S.C. 831n-4(e)) as an annual return on the 
                appropriations investment and an annual repayment sum.
                    ``(B) Treatment of credits.--The aggregate amount 
                of credits described in paragraph (1)(A) with respect 
                to such person shall be treated in the same manner and 
                to the same extent as if such credits were a payment in 
                cash and shall be applied first against the annual 
                return on the appropriations investment.
                    ``(C) Credit carryover.--With respect to any fiscal 
                year, if the aggregate amount of credits described in 
                paragraph (1)(A) with respect to such person exceeds 
                the aggregate amount of payment obligations described 
                in subparagraph (A), the excess amount shall remain 
                available for application as credits against the 
                amounts of such payment obligations in succeeding 
                fiscal years in the same manner as described in this 
                paragraph.
            ``(5) Credit not income.--Any transfer under paragraph (2) 
        or use under paragraph (3) of any credit to which paragraph 
        (1)(A) applies shall not be treated as income for purposes of 
        section 501(c)(12).
            ``(6) Treatment of unrelated persons.--For purposes of this 
        subsection, sales among and between persons described in 
        clauses (i), (ii), (iii), and (v) of paragraph (1)(A) shall be 
        treated as sales between unrelated parties.''.
    (b) Effective Date.--The amendment made by this section shall apply 
to production after the date of the enactment of this Act, in taxable 
years ending after such date.

SEC. 7. ELIGIBILITY FOR TAX CREDITS.

    (a) In General.--The Secretary of the Treasury, in consultation 
with the Secretary of Energy, may certify that an eligible entity, as 
defined in section 113 of the Natural Gas Price Reduction Act of 2005, 
qualifies for--
            (1) an investment tax credit; or
            (2) a production tax credit.
    (b) Requirement.--A taxpayer shall not be entitled to a tax credit 
described in subsection (a) without certification by the Secretary of 
the Treasury.
                                 <all>