[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.
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