[Congressional Bills 110th Congress]
[From the U.S. Government Publishing Office]
[S. 1370 Introduced in Senate (IS)]







110th CONGRESS
  1st Session
                                S. 1370

 To amend the Internal Revenue Code of 1986 to ensure more investment 
              and innovation in clean energy technologies.


_______________________________________________________________________


                   IN THE SENATE OF THE UNITED STATES

                              May 11, 2007

  Ms. Cantwell (for herself, Mr. Smith, and Mr. Kerry) 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 ensure more investment 
              and innovation in clean energy technologies.

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

SECTION 1. SHORT TITLE; ETC.

    (a) Short Title.--This Act may be cited as the ``Clean Energy 
Investment Assurance Act of 2007''.
    (b) Amendment of 1986 Code.--Except as otherwise expressly 
provided, whenever in this Act an amendment or repeal is expressed in 
terms of an amendment to, or repeal of, a section or other provision, 
the reference shall be considered to be made to a section or other 
provision of the Internal Revenue Code of 1986.
    (c) Table of Contents.--The table of contents of this Act is as 
follows:

Sec. 1. Short title; etc.
Sec. 2. Expansion and modification of renewable electricity production 
                            credit.
Sec. 3. Extension and expansion of credit to holders of clean renewable 
                            energy bonds.
Sec. 4. Extension and modification of residential energy efficient 
                            property credit.
Sec. 5. Extension and modification of energy credit.
Sec. 6. Extension and modification of nonbusiness energy property 
                            credit.
Sec. 7. Extension of new energy efficient home credit.
Sec. 8. Extension and modification of deduction for energy efficient 
                            commercial buildings.
Sec. 9. Five-year applicable recovery period for depreciation of 
                            qualified energy management devices.

SEC. 2. EXPANSION AND MODIFICATION OF RENEWABLE ELECTRICITY PRODUCTION 
              CREDIT.

    (a) Credit To Include Production of Thermal Energy.--
            (1) In general.--Section 45 is amended by adding at the end 
        the following new subsection:
    ``(f) Credit for Production of Thermal Energy.--
            ``(1) In general.--In the case of a taxpayer who--
                    ``(A) produces thermal energy from closed-loop 
                biomass, open-loop biomass, or geothermal energy at a 
                qualified facility, and
                    ``(B) makes an election under this subsection with 
                respect to such facility,
        subsection (a) shall be applied by substituting `each 3,413 
        Btus of thermal energy (or fraction thereof)' for `the kilowatt 
        hours of electricity' in paragraph (2) thereof.
            ``(2) Denial of double benefit.--If an election under this 
        subsection is in effect with respect to any facility, no credit 
        shall be allowed under subsection (a) with respect to the 
        production of electricity at such facility.
            ``(3) Election.--
                    ``(A) In general.--An election under this 
                subsection shall specify the facility to which the 
                election applies and shall be in such manner as the 
                Secretary may by regulations prescribe.
                    ``(B) Election irrevocable.--Any election made 
                under this subsection may not be revoked except with 
                the consent of the Secretary.''.
            (2) Conforming amendments.--
                    (A) Section 45(c)(2) is amended by inserting ``or 
                thermal energy'' after ``electricity''.
                    (B) Section 45(d) is amended by inserting ``or 
                thermal energy'' after ``electricity'' each place it 
                appears in paragraphs (2), (3), and (4).
                    (C) Section 45(e) is amended by inserting ``or 
                thermal energy'' after ``electricity'' each place it 
                appears in paragraphs (1) and (4).
                    (D) The heading of section 45 is amended by 
                inserting ``and thermal energy'' after ``electricity''.
                    (E) The item relating to section 45 in the table of 
                sections for subpart D of part IV of subchapter A of 
                chapter 1 is amended by inserting ``and thermal 
                energy'' after ``Electricity''.
    (b) Extension.--Paragraphs (1), (2), (3), (4), (5), (6), (7), and 
(9) of section 45(d) (relating to qualified facilities) is amended by 
striking ``January 1, 2009'' each place it appears and inserting 
``January 1, 2014''.
    (c) Credit Allowed for Zero-Carbon Emissions Resource Facilities.--
            (1) In general.--Section 45(c)(1) (defining qualified 
        energy resources) is amended by striking ``and'' at the end of 
        subparagraph (G), by striking the period at the end of 
        subparagraph (H) and inserting ``, and'', and by adding at the 
        end the following new subparagraph:
                    ``(I) zero-carbon emissions resources.''.
            (2) Definition of resources.--Section 45(c) is amended by 
        adding at the end the following new paragraph:
            ``(10) Zero-carbon emissions resource.--The term `zero-
        carbon emission resource' means any resource--
                    ``(A) not described in paragraphs (2) through (9),
                    ``(B) from which electricity can be produced 
                without producing carbon emissions, and
                    ``(C) which is approved by the Secretary.''.
            (3) Facilities.--Section 45(d) is amended by adding at the 
        end the following new paragraph:
            ``(11) Zero-carbon emissions resource facility.--In the 
        case of a facility using a zero-carbon emissions resource to 
        produce electricity, the term `qualified facility' means any 
        facility owned by the taxpayer which is originally placed in 
        service after the date of the enactment of this paragraph and 
        before January 1, 2014.''.
    (d) Repeal of Reduction for Grants, Tax-Exempt Bonds, Subsidized 
Energy Financing, etc.--Subsection (b) of section 45 is amended by 
striking paragraph (3) and by redesignating paragraph (4) as paragraph 
(3).
    (e) Elimination of Reduced Credit Rate for Electricity Produced and 
Sold From Certain Facilities.--Paragraph (3) of section 45(b), as 
redesignated by subsection (d), is amended to read as follows:
            ``(3) Credit period for electricity produced and sold from 
        certain facilities.--
                    ``(A) In general.--Except as provided in 
                subparagraph (B) or subparagraph (C), in the case of 
                any facility described in paragraph (3), (4), (5), (6), 
                or (7) of subsection (d), the 5-year period beginning 
                on the date the facility was originally placed in 
                service shall be substituted for the 10-year period in 
                subsection (a)(2)(A)(ii).
                    ``(B) Certain open-loop biomass facilities.--In the 
                case of any facility described in subsection 
                (d)(3)(A)(ii) placed in service before October 22, 
                2004, the 5-year period beginning on January 1, 2005, 
                shall be substituted for the 10-year period in 
                subsection (a)(2)(A)(ii).
                    ``(C) Termination.--Subparagraph (A) shall not 
                apply to any facility placed in service after August 8, 
                2005.''.
    (f) Modification of Definition of Closed-Loop Biomass.--Paragraph 
(2) of section 45(c), as amended by subsection (a)(2)(A), is amended by 
adding at the end the following new sentence: ``For purposes of the 
preceding sentence, a plant shall not fail to be considered as having 
been planted exclusively for purposes of being used at a qualified 
facility to produce electricity or thermal energy solely because any 
portion of such plant is used to produce alcohol (as defined in section 
40(d)(1)), biodiesel (as defined in section 40A(d)(1)), or a fuel 
described in section 6426(d)(2)(F).''.
    (g) Modification to Qualified Hydropower Facilities.--
            (1) Nonhydroelectric dams.--Clause (iii) of section 
        45(c)(8)(C) is amended to read as follows:
                            ``(iii) turbines or other generating 
                        devices are to be added to the facility after 
                        such date to produce hydroelectric power, but 
                        only if any enlargement of the diversion 
                        structure, or construction or enlargement of a 
                        bypass channel, is completed in compliance with 
                        the Federal Energy Regulatory Commission 
                        license of the facility and there is no 
                        additional impoundment or any withholding of 
                        any additional water from the natural stream 
                        channel.''.
            (2) Qualified hydropower facility.--Paragraph (9) of 
        section 45(d), as amended by subsection (b), is amended to read 
        as follows:
            ``(9) Qualified hydropower facility.--
                    ``(A) In general.--In the case of a facility 
                producing qualified hydroelectric production described 
                in subsection (c)(8), the term `qualified facility' 
                means--
                            ``(i) in the case of any facility producing 
                        incremental hydropower production, such 
                        facility but only to the extent of its 
                        incremental hydropower production attributable 
                        to efficiency improvements or additions of 
                        capacity described in subsection (c)(8)(B) 
                        placed in service after August 8, 2005, and 
                        before January 1, 2014, and
                            ``(ii) any other facility placed in service 
                        after August 8, 2005, and before January 1, 
                        2014.
                    ``(B) Credit period.--In the case of a qualified 
                facility described in subparagraph (A)(i), the 10-year 
                period referred to in subsection (a) shall be treated 
                as beginning on the date the efficiency improvements or 
                additions of capacity are placed in service.''.
    (h) Repeal of Netting Rule for Simultaneous Sales and Purchases of 
Electricity Produced From Open-Loop Biomass.--Subsection (e) of section 
45 is amended by adding at the end the following new paragraph:
            ``(12) Special rule relating to simultaneous sale and 
        purchase of electricity produced from open-loop biomass.--
        Electricity or thermal energy produced from open-loop biomass 
        by the taxpayer at any location and sold to an unrelated party 
        shall be taken into account under subsection (a) 
        notwithstanding whether such taxpayer simultaneously purchased 
        electricity or thermal energy from an unrelated person for use 
        at the same location.''.
    (i) Effective Dates.--
            (1) In general.--Except as provided in paragraph (2), the 
        amendments made by this section shall apply to electricity and 
        thermal energy produced and sold after the date of the 
        enactment of this Act, in taxable years ending after such date.
            (2) Subsection (c).--The amendment made by subsection (c) 
        shall apply to electricity produced and sold after December 31, 
        2008, in taxable years ending after such date.

SEC. 3. EXTENSION AND EXPANSION OF CREDIT TO HOLDERS OF CLEAN RENEWABLE 
              ENERGY BONDS.

    (a) Extension.--Section 54(m) (relating to termination) is amended 
by striking ``2008'' and inserting ``2013''.
    (b) Annual Volume Cap for Bonds Issued During Extension Period.--
Paragraph (1) of section 54(f) (relating to limitation on amount of 
bonds designated) is amended to read as follows:
            ``(1) National limitation.--
                    ``(A) Initial national limitation.--With respect to 
                bonds issued after December 31, 2005, and before 
                January 1, 2009, there is a national clean renewable 
                energy bond limitation of $1,200,000,000.
                    ``(B) Annual national limitation.--With respect to 
                bonds issued after December 31, 2008, and before 
                January 1, 2014, there is a national clean renewable 
                energy bond limitation for each calendar year of 
                $5,000,000,000.''.
    (c) Effective Date.--The amendments made by this section shall 
apply to bonds issued after December 31, 2007.

SEC. 4. EXTENSION AND MODIFICATION OF RESIDENTIAL ENERGY EFFICIENT 
              PROPERTY CREDIT.

    (a) Extension.--Subsection (g) of section 25D (relating to 
termination) is amended by striking ``December 31, 2008'' and inserting 
``December 31, 2016''.
    (b) Solar Electric Property.--Paragraph (1) of section 25D(a) is 
amended by striking ``30 percent of''.
    (c) Inclusion of Energy Storage Air Conditioner Property.--
            (1) In general.--Subsection (a) of section 25D is amended 
        by striking ``and'' at the end of paragraph (2), by striking 
        the period at the end of paragraph (3) and inserting ``, and'', 
        and by adding at the end the following new paragraph:
            ``(4) 30 percent of the qualified energy storage air 
        conditioner property expenditures made by the taxpayer during 
        such year.''.
            (2) Qualified energy storage air conditioner property 
        expenditure.--Section 25D(d) is amended by adding at the end 
        the following new paragraph:
            ``(4) Qualified energy storage air conditioner property 
        expenditure.--The term `qualified energy storage air 
        conditioner property expenditure' means an expenditure for 
        qualified energy storage air conditioner property (as defined 
        in section 48(d)) installed on or in connection with a dwelling 
        unit located in the United States and used as a principal 
        residence (within the meaning of section 121) by the 
        taxpayer.''.
    (d) Modification of Maximum Credit.--
            (1) In general.--Paragraph (1) of section 25D(b) is amended 
        to read as follows:
            ``(1) Maximum credit.--The credit allowed under subsection 
        (a) for any taxable year shall not exceed--
                    ``(A) $1,500 with respect to each half kilowatt of 
                direct current of installed capacity of qualified solar 
                electric property for which qualified solar electric 
                property expenditures are made,
                    ``(B) $2,000 with respect to any qualified solar 
                heating and cooling property expenditures,
                    ``(C) $500 with respect to each half kilowatt of 
                capacity of qualified fuel cell property (as defined in 
                section 48(c)(1)) for which qualified fuel cell 
                property expenditures are made, and
                    ``(D) $500 with respect to each half kilowatt hour 
                of peak reduction of qualified energy storage air 
                conditioner property (as defined in section 48(d)) for 
                which qualified energy storage air conditioner 
                expenditures are made.''.
            (2) Conforming amendments.--Section 25D(e)(4)(A) is 
        amended--
                    (A) by striking ``$6,667 in the case of any 
                qualified solar electric property expenditures'' in 
                clause (i) and inserting ``$5,000 in the case of each 
                half kilowatt of direct current of installed capacity 
                of qualified solar electric property for which 
                qualified electric solar property expenditures are 
                made'',
                    (B) by striking ``and'' at the end of clause (ii),
                    (C) by striking the period at the end of clause 
                (iii) and inserting ``, and'', and
                    (D) by adding at the end the following new clause:
                            ``(iv) $1,667 in the case of each half 
                        kilowatt hour of peak reduction of qualified 
                        energy storage air conditioner property (as 
                        defined in section 48(d)) for which qualified 
                        energy storage air conditioner expenditures are 
                        made.''.
    (e) Definition of Qualified Solar Heating and Cooling Property 
Expenditure.--
            (1) In general.--Paragraph (1) of section 25D(d) is amended 
        to read as follows:
            ``(1) Qualified solar heating and cooling property 
        expenditure.--The term `qualified solar heating and cooling 
        property expenditure' means an expenditure for property to heat 
        or cool (or provide hot water for use in) a dwelling unit 
        located in the United States and used as a residence by the 
        taxpayer if at least half of the energy used by such property 
        for such purpose is derived from the sun. Such term shall not 
        include an expenditure which is a qualified solar electric 
        property expenditure.''.
            (2) Conforming amendments.--Subsections (a)(2) and 
        (e)(4)(A)(ii) of section 25D are each amended by striking 
        ``qualified solar water heating'' and inserting ``qualified 
        solar heating and cooling''
    (f) Definition of Qualified Photovoltaic Property Expenditure.--
Paragraph (2) of section 25D(d) is amended by inserting ``, including 
advanced energy storage systems installed as an integrated component of 
the foregoing'' after ``taxpayer''.
    (g) Credit Allowed Against Alternative Minimum Tax.--
            (1) In general.--Section 25D(b) is amended by adding at the 
        end the following new paragraph:
            ``(3) Credit allowed against alternative minimum tax.--The 
        credit allowed under subsection (a) for the taxable year shall 
        not exceed the excess of--
                    ``(A) the sum of the regular tax liability (as 
                defined in section 26(b)) plus the tax imposed by 
                section 55, over
                    ``(B) the sum of the credits allowable under 
                subpart A of part IV of subchapter A (other than this 
                section) and section 27 for the taxable year.''.
            (2) Conforming amendments.--
                    (A) Subsection (c) of section 25D is amended to 
                read as follows:
    ``(c) Carryforward of Unused Credit.--If the credit allowable under 
subsection (a) for any taxable year exceeds the limitation imposed by 
subsection (b)(3) for such taxable year, such excess shall be carried 
to the succeeding taxable year and added to the credit allowable under 
subsection (a) for such succeeding taxable year.''.
                    (B) Section 23(b)(4)(B) is amended by inserting 
                ``and section 25D'' after ``this section''.
                    (C) Section 24(b)(3)(B) is amended by striking 
                ``sections 23 and 25B'' and inserting ``sections 23, 
                25B, and 25D''.
                    (D) Section 26(a)(1) is amended by striking ``and 
                25B'' and inserting ``25B, and 25D''.
    (h) Effective Date.--The amendments made by this section shall 
apply to expenditures made in taxable years beginning after December 
31, 2006.

SEC. 5. EXTENSION AND MODIFICATION OF ENERGY CREDIT.

    (a) Solar Property.--
            (1) Extension.--Paragraphs (2)(A)(i)(II) and (3)(A)(ii) of 
        section 48(a) are each amended by striking ``2009'' and 
        inserting ``2017''.
            (2) Solar photovoltaic energy property credit determined 
        solely by kilowatt capacity.--
                    (A) In general.--Subsection (a) of section 48 is 
                amended by redesignating paragraph (4) as paragraph (5) 
                and by inserting after paragraph (3) the following new 
                paragraph:
            ``(4) Special rule for energy credit for solar photovoltaic 
        energy property.--
                    ``(A) In general.--For purposes of section 46, the 
                energy credit for any taxable year for solar 
                photovoltaic energy property described in paragraph 
                (3)(A)(i) which is used to generate electricity and 
                which is placed in service during the taxable year 
                shall not exceed $1,500 with respect to each half 
                kilowatt of direct current of installed capacity of 
                such property. Paragraph (2)(A)(ii) shall not apply to 
                property to which the preceding sentence applies.
                    ``(B) Application of special rules for 
                rehabilitated or subsidized property.--Rules similar to 
                the rules of paragraphs (2)(B) and (5) shall apply to 
                property to which this paragraph applies.''.
                    (B) Conforming amendment.--Subclause (II) of 
                section 48(a)(2)(A)(i) is amended by striking 
                ``described in paragraph (3)(A)(i)'' and inserting 
                ``which is described in paragraph (3)(A)(i) and to 
                which paragraph (4) does not apply''.
    (b) Qualified Fuel Cell Property.--
            (1) Extension.--Subparagraph (E) of section 48(c)(1) is 
        amended by striking ``2008'' and inserting ``2016''.
            (2) Repeal of limitation.--Paragraph (1) of section 48(c), 
        as amended by paragraph (1), is amended by striking 
        subparagraph (B) and by redesignating subparagraphs (C), (D), 
        and (E) as subparagraphs (B), (C), and (D), respectively.
    (c) Energy Credit Allowed for Energy Storage Air Conditioner 
Property.--
            (1) In general.--Clause (i) of section 48(a)(2)(A) is 
        amended by striking ``and'' at the end of subclause (II) and by 
        inserting after subclause (III) the following new subclause:
                                    ``(IV) qualified energy storage air 
                                conditioner property, and''.
            (2) Qualified energy storage air conditioner property.--
        Section 48 is amended by adding at the end the following new 
        subsection:
    ``(d) Qualified Energy Storage Air Conditioner Property.--For the 
purposes of this section--
            ``(1) In general.--The term `qualified energy storage air 
        conditioner property' means a cooling system consisting of 
        components which create, store, and supply cooling energy to 
        reduce peak electricity demand by displacing the electrical 
        demand of conventional mechanical cooling equipment, and all 
        secondary components to integrate with the conventional cooling 
        system, including equipment and controls for operation and 
        performance measuring and reporting, provided that such cooling 
        system--
                    ``(A) has a nameplate operational capability to 
                deliver a minimum of 36,000 Btu and maximum of 120,000 
                Btu of cooling capacity for a minimum continuous period 
                of 4 hours, available daily from May 1 through 
                September 30 coincident with local utility designated 
                peak load periods,
                    ``(B) is designed so as to reduce kilowatt demand 
                by 90 percent for the cooling load served, and
                    ``(C) is designed so as not to exceed the 24 hour 
                energy consumption of conventional cooling equipment.
            ``(2) Limitation.--In the case of qualified energy storage 
        air conditioning property placed in service during the taxable 
        year, the credit otherwise determined under this section for 
        such year with respect to such property shall not exceed an 
        amount equal to $500 for each 0.5 kilowatt of peak reduction 
        capacity of such property.
            ``(3) Termination.--The term `energy storage air 
        conditioner property' shall not include any property for any 
        period after January 1, 2016.''.
    (d) Repeal of Public Utility Property Exclusion.--
            (1) In general.--Paragraph (3) of section 48(a) is amended 
        by striking the first sentence which follows subparagraph (D).
            (2) Conforming amendments.--
                    (A) Section 48(c)(1), as amended by subsection (b), 
                is amended by striking subparagraph (C) and by 
                redesignating subparagraph (D) as subparagraph (C).
                    (B) Section 48(c)(2) is amended by striking 
                subparagraph (D) and by redesignating subparagraph (E) 
                as subparagraph (D).
    (e) Credits Allowed Against the Alternative Minimum Tax.--Section 
38(c)(4)(B) is amended by striking ``and'' at the end of clause (i), by 
striking the period at the end of clause (ii)(II) and inserting ``, 
and'', and by adding at the end the following new clause:
                            ``(iii) the portion of the investment 
                        credit under section 46 which is determined 
                        under section 48(a).''.
    (f) Effective Dates.--
            (1) In general.--Except as provided in paragraph (2), the 
        amendments made by this section shall apply to taxable years 
        beginning after the date of the enactment of this Act.
            (2) Repeal of public utility property exclusion.--The 
        amendments made by subsection (d) shall apply to periods after 
        December 31, 2006, 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. 6. EXTENSION AND MODIFICATION OF NONBUSINESS ENERGY PROPERTY 
              CREDIT.

    (a) In General.--Subsection (g) of section 25C (relating to 
termination) is amended by striking ``2007'' and inserting ``2012''.
    (b) Labor Costs for Qualified Energy Efficiency Improvements.--
Section 25C(c)(1) is amended by adding at the end the following new 
flush sentence:
        ``The amount taken into account under subsection (a)(1) with 
        respect to qualified energy efficiency improvements shall 
        include expenditures for labor costs properly allocable to the 
        onsite preparation, assembly, or original installation of any 
        component described in this paragraph.''.
    (c) Modifications for Residential Energy Efficiency Property 
Expenditures.--
            (1) Increased limitation for oil furnaces and natural gas, 
        propane, and oil hot water boilers.--
                    (A) In general.--Subparagraphs (B) and (C) of 
                section 25C(b)(3) are amended to read as follows:
                    ``(B) $150 for any qualified natural gas furnace or 
                qualified propane furnace, and
                    ``(C) $300 for--
                            ``(i) any item of energy-efficient building 
                        property, and
                            ``(ii) any qualified oil furnace, qualified 
                        natural gas hot water boiler, qualified propane 
                        hot water boiler, or qualified oil hot water 
                        boiler.''.
                    (B) Conforming amendment.--Clause (ii) of section 
                25C(d)(2)(A) is amended to read as follows:
                            ``(ii) any qualified natural gas furnace, 
                        qualified propane furnace, qualified oil 
                        furnace, qualified natural gas hot water 
                        boiler, qualified propane hot water boiler, or 
                        qualified oil hot water boiler, or''.
            (2) Modifications of standards for energy-efficient 
        building property.--
                    (A) Electric heat pumps.--Subparagraph (B) of 
                section 25C(d)(3) is amended to read as follows:
                    ``(A) an electric heat pump which achieves the 
                highest efficiency tier established by the Consortium 
                for Energy Efficiency, as in effect on January 1, 
                2008.''.
                    (B) Central air conditioners.--Section 25C(d)(3)(D) 
                is amended by striking ``2006'' and inserting ``2008''.
                    (C) Water heaters.--Subparagraph (E) of section 
                25C(d) is amended to read as follows:
                    ``(E) a natural gas, propane, or oil water heater 
                which has either an energy factor of at least 0.80 or a 
                thermal efficiency of at least 90 percent.''.
                    (D) Oil furnaces and hot water boilers.--Paragraph 
                (4) of section 25C(d) is amended to read as follows:
            ``(4) Qualified natural gas, propane, and oil furnaces and 
        hot water boilers.--
                    ``(A) Qualified natural gas furnace.--The term 
                `qualified natural gas furnace' means any natural gas 
                furnace which achieves an annual fuel utilization 
                efficiency rate of not less than 95.
                    ``(B) Qualified natural gas hot water boiler.--The 
                term `qualified natural gas hot water boiler' means any 
                natural gas hot water boiler which achieves an annual 
                fuel utilization efficiency rate of not less than 90.
                    ``(C) Qualified propane furnace.--The term 
                `qualified propane furnace' means any propane furnace 
                which achieves an annual fuel utilization efficiency 
                rate of not less than 95.
                    ``(D) Qualified propane hot water boiler.--The term 
                `qualified propane hot water boiler' means any propane 
                hot water boiler which achieves an annual fuel 
                utilization efficiency rate of not less than 90.
                    ``(E) Qualified oil furnaces.--The term `qualified 
                oil furnace' means any oil furnace which achieves an 
                annual fuel utilization efficiency rate of not less 
                than 90.
                    ``(F) Qualified oil hot water boiler.--The term 
                `qualified oil hot water boiler' means any oil hot 
                water boiler which achieves an annual fuel utilization 
                efficiency rate of not less than 90.''.
            (3) Elimination of lifetime limitation.--Paragraph (1) of 
        section 25C(b) is amended by inserting ``by reason of 
        subsection (a)(1)'' after ``under this section''.
    (d) Modification of Qualified Energy Efficiency Improvements.--
            (1) In general.--Paragraph (1) of section 25C(c) is amended 
        by inserting ``, or an asphalt roof with appropriate cooling 
        granules,'' before ``which meet the Energy Star program 
        requirements''.
            (2) Building envelope component.--Subparagraph (D) of 
        section 25C(c)(2) is amended--
                    (A) by inserting ``or asphalt roof'' after ``metal 
                roof'', and
                    (B) by inserting ``or cooling granules'' after 
                ``pigmented coatings''.
    (e) Natural Gas Fired Heat Pumps.--Section 25C(d)(3), as amended by 
this section, is amended by striking ``and'' at the end of subparagraph 
(D), by striking the period at the end of subparagraph (E) and 
inserting ``, and'', and by adding at the end the following new 
subparagraph:
                    ``(F) a natural gas fired heat pump with a heating 
                coefficient of performance (COP) of at least 1.1.''.
    (f) Elimination of Credit for Qualified Energy Efficiency 
Improvements in 2010.--
            (1) In general.--Subsection (a) of section 25C is amended 
        to read as follows:
    ``(a) Allowance of Credit.--In the case of an individual, there 
shall be allowed as a credit against the tax imposed by this chapter 
for the taxable year an amount equal to the amount of residential 
energy property expenditures paid or incurred by the taxpayer during 
the taxable year.''.
            (2) Conforming amendments.--
                    (A) Section 25C(b), as amended by subsection (b), 
                is amended by striking paragraphs (1) and (2) and by 
                redesignating paragraph (3) as paragraph (1).
                    (B) Section 25C(b)(1), as redesignated by 
                subparagraph (A), is amended by striking ``by reason of 
                subsection (a)(2)''.
                    (C) Section 25C is amended by striking subsection 
                (c).
    (g) Clarification of Eligibility of Standards for Qualified Energy 
Property.--Section 25C(d)(2)(C) is amended by striking ``and'' at the 
end of clause (i), by striking the period at the end of clause (ii) and 
inserting ``, and'', and by adding at the end the following new clause:
                            ``(iii) shall allow for the testing of 
                        products regardless of the size or capacity of 
                        the product.''.
    (h) Effective Dates.--
            (1) In general.--Except as provided in paragraphs (2) and 
        (3), the amendments made by this section shall apply to 
        property placed in service after the date of the enactment of 
        this Act.
            (2) Standards for electric heat pumps and central air 
        conditioners.--The amendments made by subparagraphs (A) and (B) 
        subsection (c)(2) shall apply to property placed in service 
        after December 31, 2007.
            (3) Elimination of credit for qualified energy efficiency 
        improvements.--The amendments made by subsection (f) shall 
        apply to property placed in service after December 31, 2009.

SEC. 7. EXTENSION OF NEW ENERGY EFFICIENT HOME CREDIT.

    (a) In General.--Subsection (g) of section 45L (relating to 
termination) is amended by striking ``2008'' and inserting ``2013''.
    (b) Effective Date.--The amendment made by subsection (a) shall 
apply for qualified new energy efficient homes acquired after the date 
of the enactment of this Act, in taxable years ending after such date.

SEC. 8. EXTENSION AND MODIFICATION OF DEDUCTION FOR ENERGY EFFICIENT 
              COMMERCIAL BUILDINGS.

    (a) Extension.--Subsection (h) of section 179D (relating to 
termination) is amended to read as follows:
    ``(h) Termination.--This section shall not apply with respect to 
property--
            ``(1) which is certified under subsection (d)(6) after 
        December 31, 2012, or
            ``(2) which is placed in service after December 31, 2014.
A provisional certification shall be treated as meeting the 
requirements of paragraph (1) if it is based on the building plans, 
subject to inspection and testing after installation.''.
    (b) Increase in Maximum Amount of Deduction.--
            (1) In general.--Subparagraph (A) of section 179D(b)(1) is 
        amended by striking ``$1.80'' and inserting ``$2.25''.
            (2) Partial allowance.--Paragraph (1) of section 179D(d) is 
        amended--
                    (A) by striking ``$.60'' and inserting ``$0.75'', 
                and
                    (B) by striking ``$1.80'' and inserting ``$2.25''.
    (c) Modifications to Certain Special Rules.--
            (1) Methods of calculating energy savings.--
                    (A) In general.--Paragraph (2) of section 179D(d) 
                is amended--
                            (i) by striking ``based on'' and inserting 
                        ``in accordance with'',
                            (ii) by inserting ``, except as necessary 
                        to carry out the requirements of this section, 
                        to accommodate a reference to Standard 90.1-
                        2001, to extend the applicability of such 
                        manual to national conditions, or to update 
                        technical standards based on new information'' 
                        before the period at the end, and
                            (iii) by adding at the end the following 
                        new sentence: ``The calculation methods 
                        contained in such regulations shall also 
                        provide for the calculation of appropriate 
                        energy savings for design methods and 
                        technologies not otherwise credited in such 
                        manual or standard, including energy savings 
                        associated with natural ventilation, 
                        evaporative cooling, automatic lighting 
                        controls (such as occupancy sensors, 
                        photocells, and timeclocks), daylighting, 
                        designs utilizing semi-conditioned spaces which 
                        maintain adequate comfort conditions without 
                        air conditioning or without heating, improved 
                        fan system efficiency (including reductions in 
                        static pressure), advanced unloading mechanisms 
                        for mechanical cooling (such as multiple or 
                        variable speed compressors), on-site generation 
                        of electricity (including combined heat and 
                        power systems, fuel cells, and renewable energy 
                        generation such as solar energy), and wiring 
                        with lower energy losses than wiring satisfying 
                        Standard 90.1-2001 requirements for building 
                        power distribution systems.''.
                    (B) Requirements for computer software used in 
                calculating energy and power consumption costs.--
                Paragraph (3)(B) of section 179D(d) is amended by 
                striking ``and'' at the end of clause (ii), by striking 
                the period at the end of clause (iii) and inserting ``, 
                and'', and by adding at the end the following:
                            ``(iv) which automatically--
                                    ``(I) generates the features, 
                                energy use, and energy and power 
                                consumption costs of a reference 
                                building which meets Standard 90.1-
                                2001,
                                    ``(II) generates the features, 
                                energy use, and energy and power 
                                consumption costs of a compliant 
                                building or system which reduces the 
                                annual energy and power costs by 50 
                                percent compared to Standard 90.1-2001, 
                                and
                                    ``(III) compares such features, 
                                energy use, and consumption costs to 
                                the features, energy use, and 
                                consumption costs of the building or 
                                system with respect to which the 
                                calculation is being made.''.
            (2) Targets for partial allowance of credit.--Paragraph 
        (1)(B) of section 179D(d) is amended--
                    (A) by striking ``The Secretary'' and inserting the 
                following:
                            ``(i) In general.--The Secretary'', and
                    (B) by adding at the end the following:
                            ``(ii) Additional requirements.--For 
                        purposes of clause (i)--
                                    ``(I) the Secretary shall determine 
                                prescriptive criteria that can be 
                                modeled explicitly for reference 
                                buildings which meet the requirements 
                                of subsection (c)(1)(D) for different 
                                building types and regions,
                                    ``(II) a system may be certified as 
                                meeting the target under subparagraph 
                                (A)(ii) if the appropriate reference 
                                building either meets the requirements 
                                of subsection (c)(1)(D) with such 
                                system rather than the comparable 
                                reference system (using the calculation 
                                under paragraph (2)) or meets the 
                                relevant prescriptive criteria under 
                                subclause (I), and
                                    ``(III) the lighting system target 
                                shall be based on lighting power 
                                density, except that it shall allow 
                                lighting controls credits that trade 
                                off for lighting power density savings 
                                based on Section 3.2.2 of the 2005 
                                California Nonresidential Alternative 
                                Calculation Method Approval Manual.
                            ``(iii) Publication.--The Secretary shall 
                        publish in the Federal Register the bases for 
                        the target levels established in the 
                        regulations under clause (i).''.
    (d) Alternative Standards.--Section 179D(d) is amended by adding at 
the end the following new paragraph:
            ``(7) Alternative standards pending final regulations.--
        Until such time as the Secretary issues final regulations under 
        paragraph (1)(B)--
                    ``(A) in the case of property which is part of a 
                building envelope, the building envelope system target 
                under paragraph (1)(A)(ii) shall be a 7 percent 
                reduction in total annual energy and power costs 
                (determined in the same manner as under subsection 
                (c)(1)(D)), and
                    ``(B) in the case of property which is part of the 
                heating, cooling, ventilation, and hot water systems, 
                the heating, cooling, ventilation, and hot water system 
                shall be treated as meeting the target under paragraph 
                (1)(A)(ii) if it would meet the requirement in 
                subsection (c)(1)(D) if combined with a building 
                envelope system and lighting system which met their 
                respective targets under paragraph(1)(A)(ii) (including 
                interim targets in effect under subsections (f) and 
                subparagraph (A)).''.
    (e) Modifications to Lighting Standards.--
            (1) Standards to be alternate standards.--Subsection (f) of 
        section 179D is amended by--
                    (A) striking ``Interim'' in the heading and 
                inserting ``Alternative'', and
                    (B) inserting ``, or, if the taxpayer elects, in 
                lieu of the target set forth in such final 
                regulations'' after ``lighting system'' at the end of 
                the matter preceding paragraph (1).
            (2) Qualified individuals.--Section 179D(d)(6)(C) is 
        amended by adding at the end the following: ``For purposes of 
        certification of whether the alternative target for lighting 
        systems under subsection (f) is met, individuals qualified to 
        determine compliance shall include individuals who are 
        certified as Lighting Certified (LC) by the National Council on 
        Qualifications for the Lighting Professions, Certified Energy 
        Managers (CEM) by the Association of Energy Engineers, and LEED 
        Accredited Professionals (AP) by the U.S. Green Buildings 
        Council.''.
            (3) Requirement for bilevel switching.--Section 179D(f)(2) 
        is amended by adding at the end the following new subparagraph:
            ``(3) Application of subsection to bilevel switching.--
                    ``(A) In general.--Notwithstanding paragraph 
                (2)(C)(i), this subsection shall apply to a system 
                which does not include provisions for bilevel switching 
                if the reduction in lighting power density is at least 
                37.5 percent of the minimum requirements in Table 
                9.3.1.1 or Table 9.3.1.2. (not including additional 
                interior lighting allowances) of Standard 90.1-2001.
                    ``(B) Reduction in deduction.--In the case of a 
                system to which this subsection applies by reason of 
                subparagraph (A), paragraph (2) shall be applied--
                            ``(i) by substituting `50 percent' for `40 
                        percent' in subparagraph (A) thereof, and
                            ``(ii) in subparagraph (B)(ii) thereof--
                                    ``(I) by substituting `37.5 
                                percentage points' for `25 percentage 
                                points', and
                                    ``(II) by substituting `12.5' for 
                                `15'.''.
    (f) Public Property.--Paragraph (4) of section 179(d) is amended by 
striking ``the Secretary shall promulgate a regulation to allow the 
allocation of the deduction'' and inserting ``the deduction under this 
section shall be allowed''.
    (g) Effective Date.--The amendments made by this section shall 
apply to property placed in service in taxable years beginning after 
the date of the enactment of this Act.

SEC. 9. FIVE-YEAR APPLICABLE RECOVERY PERIOD FOR DEPRECIATION OF 
              QUALIFIED ENERGY MANAGEMENT DEVICES.

    (a) In General.--Section 168(e)(3)(B) (defining 5-year property) is 
amended by striking ``and'' at the end of clause (v), by striking the 
period at the end of clause (vi)(III) and inserting ``, and'', and by 
inserting after clause (vi) the following new clause:
                            ``(vii) any qualified energy management 
                        device.''.
    (b) Definition of Qualified Energy Management Device.--Section 
168(i) (relating to definitions and special rules) is amended by 
inserting at the end the following new paragraph:
            ``(18) 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, 2012, 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 two-way communications network and associated 
                equipment, including equipment installed on the 
                premises of a consumer, which is used by the taxpayer--
                            ``(i) to measure and record electricity 
                        usage data on a time-differentiated basis of at 
                        least 10 minutes, and
                            ``(ii) to provide such data on demand to 
                        both consumers and the taxpayer.''.
                                 <all>