S. 1711 – Reading Mode

111th CONGRESS

1st Session

S. 1711

IN THE SENATE OF THE UNITED STATES

September 24, 2009

Mr. Reid (for himself and Mr. Ensign) 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 provide tax incentives for making homes more water-efficient, for building new water-efficient homes, for public water conservation, and for other purposes.

Short title

This Act may be cited as the Water Efficiency and Conservation Investment Act of 2009.

Residential water efficiency credit

(a)

In general

Subpart B of part IV of subchapter A of chapter 1 of the Internal Revenue Code is amended by inserting after section 30D the following new section:

30E.

Residential water efficiency credit

(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 50 percent of the qualified water efficiency property expenditures paid or incurred during such taxable year.

(b)

Limitation

The credit allowed under this section with respect to any taxpayer for any taxable year shall not exceed $750.

(c)

Qualified water efficiency property expenditures

For purposes of this section—

(1)

In general

The term qualified water efficiency property expenditures means expenditures for qualified water efficiency property which is—

(A)

installed on or in connection with a dwelling unit located in the United States that is owned by the taxpayer (without regard to whether any other person occupies such dwelling unit as a residence), and

(B)

originally placed in service by the taxpayer.

Such term includes expenditures for labor costs properly allocable to the onsite preparation, assembly, or original installation of such property.

(2)

Qualified water efficiency property

The term qualified water efficiency property means—

(A)

property which meets the national efficiency standards and specifications for residential water-using fixtures, appliances, and devices under the WaterSense program of the Environmental Protection Agency that are in effect on the date of purchase of such property, but only if such property improves water efficiency by no less than 20 percent over standard models of similar water-using fixtures and appliances as determined by the Administrator of such Agency, and

(B)

water efficient landscaping which is installed by a landscape irrigation professional certified by such WaterSense program and which reduces water use by no less than 50 percent, as certified by such professional.

(3)

State water efficiency standards

In the case of a State that has mandatory water efficiency standards for any property that are more stringent than the standards and specifications described in paragraph (2), property installed on or in connection with a dwelling unit that is located in such State must meet such water efficiency standards of such State in order to be treated as qualified water efficiency property for purposes of this section.

(d)

Special rules

For purposes of this section—

(1)

Joint ownership of water efficiency items

(A)

In general

An expenditure shall not fail to be treated as a qualified water efficiency property expenditure merely because such expenditure was made with respect to 2 or more dwelling units.

(B)

Allocation of expenditures

In the case of an expenditure made with respect to 2 or more dwelling units, for purposes of determining the credit allowable under this section, such expenditure shall be allocated among such dwelling units in proportion to the amount of the expenditure made for each dwelling unit.

(2)

Refunds disregarded in the administration of Federal programs and federally assisted programs

Any credit or refund allowed or made to any individual by reason of this section shall not be taken into account as income and shall not be taken into account as resources, for purposes of determining the eligibility of such individual or any other individual for benefits or assistance, or the amount or extent of benefits or assistance, under any Federal program or under any State or local program financed in whole or in part with Federal funds.

(3)

Basis adjustments

For purposes of this subtitle, if a credit is allowed under subsection (a) 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.

(4)

Denial of double benefit

(A)

In general

No deduction or credit under any other provision of this chapter shall be allowed with respect to the amount of any qualified water efficiency property expenditure taken into account under this section.

(B)

Rebate programs

The amount of any qualified water efficiency property expenditure for which an individual is reimbursed under any Federal government program shall not be taken into account for purposes of determining the credit under subsection (a) with respect such individual.

(e)

Application with other credits

(1)

Business credit

(A)

Business credit treated as part of general business credit

So much of the credit which would be allowed under subsection (a) for any taxable year (determined without regard to this subsection) that is attributable to property of a character subject to an allowance for depreciation shall be treated as a credit listed in section 38(b) for such taxable year (and not allowed under subsection (a)).

(B)

Disallowance of depreciation

In the case of an expenditure for property described in subparagraph (A) with respect to which a credit is allowed under section 38(b) by reason of such subparagraph, the depreciation allowance for such property in all taxable years shall be zero and no deduction shall be available under section 167 with respect to such property.

(2)

Personal credit

(A)

In general

For purposes of this title, the credit allowed under subsection (a) for any taxable year (determined after application of paragraph (1)) shall be treated as a credit allowable under subpart A for such taxable year.

(B)

Limitation based on amount of tax

In the case of a taxable year to which section 26(a)(2) does not apply, the credit allowed under subsection (a) for any taxable year (determined after application of paragraph (1)) shall not exceed the excess of—

(i)

the sum of the regular tax liability (as defined in section 26(b)), plus

(ii)

the sum of the credits allowable under subpart A (other than this section and sections 23, 25D, 30, 30B, and 30D) and section 27 for the taxable year.

(f)

Termination

This section shall not apply with respect to any property placed in service after December 31, 2014.

(b)

Conforming amendments

(1)

Section 24(b)(3)(B) of the Internal Revenue Code of 1986 is amended by striking and 30D and inserting , 30D, and 30E.

(2)

Section 25(e)(1)(C)(ii) of such Code is amended by inserting 30E, after 30D,.

(3)

Section 25B(g)(2) of such Code is amended by striking and 30D and inserting 30D, and 30E.

(4)

Section 904(i) of such Code is amended by striking and 30D and inserting 30D, and 30E.

(5)

Section 1016(a) of such Code is amended by striking and at the end of paragraph (36), by striking the period at the end of paragraph (37) and inserting , and, and by adding at the end the following new paragraph:

(38)

to the extent provided in section 30E(d)(3).

(6)

Section 1400C(d)(2) of such Code is amended by striking and 30D and inserting 30D, and 30E.

(c)

Credit To be part of business credit

Section 38(b) of the Internal Revenue Code of 1986 is amended by striking plus at the end of paragraph (34), by striking the period at the end of paragraph (35) and inserting , plus, and by adding at the end the following new paragraph:

(36)

the portion of the residential water efficiency credit to which section 30E(e)(1) applies.

(d)

Clerical amendment

The table of sections for subpart B of part IV of subchapter A of chapter 1 of the Internal Revenue Code of 1986 is amended by inserting after the item relating to section 30D the following new item:

Sec. 30E. Residential water efficiency credit.

(e)

Effective date

The amendments made by this section shall apply to property placed in service after December 31, 2009.

New water efficient home credit

(a)

In general

Subpart D of part IV of subchapter A of chapter 1 of the Internal Revenue Code of 1986 is amended by adding at the end the following new section:

45R.

New water efficient home credit

(a)

Allowance of credit

For purposes of section 38, in the case of an eligible contractor, the new water efficient home credit for the taxable year is an amount equal to $1,500 for each qualified new water efficient home which is—

(1)

constructed by such eligible contractor, and

(2)

acquired by a person from such eligible contractor during the taxable year.

(b)

Definitions

For purposes of this section—

(1)

Eligible contractor

The term eligible contractor means a person who is certified as a builder partner under the WaterSense program of the Environmental Protection Agency and who is—

(A)

the person who constructed the qualified new water 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.

(2)

Qualified new water efficient home

The term qualified new water efficient home means a dwelling unit—

(A)

located in the United States,

(B)

the construction of which is substantially completed after the date of the enactment of this section, and

(C)

which is certified by the Environmental Protection Agency as complying with the Final Water-Efficient Single-Family New Home Specification issued by such Agency.

(3)

Construction

The term construction includes substantial reconstruction and rehabilitation.

(4)

Acquire

The term acquire includes purchase.

(c)

Certification

(1)

Method of certification

A certification described in subsection (b)(2)(C) shall be made in accordance with guidance prescribed by the Secretary, after consultation with the Administrator of the Environmental Protection Agency. Such guidance shall specify procedures and methods for calculating water and cost savings.

(2)

Form

Any certification described in subsection (b)(2)(C) shall be made in writing in a manner which specifies in readily verifiable fashion the water efficient components (including toilets, faucets, other plumbing fixtures and appliances, hot water delivery, landscape design, and irrigation systems) installed and their respective rated water efficiency performance.

(d)

Basis adjustment

For purposes of this subtitle, if a credit is allowed under this section in connection with any expenditure for 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.

(e)

Coordination with other credits

Expenditures taken into account under section 45L, 47, or 48(a) shall not be taken into account under this section.

(f)

Rebate programs

The amount of the credit allowed under subsection (a) to an eligible contractor with respect to any qualified new water efficient home shall be reduced, but not below zero, by the amount of any reimbursement which such contractor receives under any Federal government program for the construction of such home or for expenditures relating to such construction.

(g)

Termination

This section shall not apply to any qualified new water efficient home acquired after December 31, 2014.

(b)

Credit To be part of general business credit

Section 38(b) of the Internal Revenue Code of 1986, as amended by this Act, is amended by striking plus at the end of paragraph (35), by striking the period at the end of paragraph (36) and inserting , plus, and by adding at the end the following new paragraph:

(37)

the new water efficient home credit determined under section 45R.

(c)

Clerical amendment

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

Sec. 45R. New water efficient home credit.

(d)

Effective date

The amendments made by this section shall apply to homes acquired after December 31, 2009.

Water conservation bonds

(a)

In general

Section 54D of the Internal Revenue Code of 1986 is amended—

(1)

by striking energy conservation bond each place it appears in subsections (a), (b), and (d), and inserting energy and water conservation bond,

(2)

by inserting and water after Qualified energy in the heading,

(3)

by striking State or local government in subsection (a)(2) and inserting State, local government, or water district,

(4)

by striking $3,200,000,000 in subsection (d) and inserting $4,000,000,000, of which not less than 20 percent shall be used for qualified conservation purposes described in subsection (f)(1)(F), and

(5)

by adding at the end of subsection (f)(1) the following new subparagraph:

(F)

Expenditures incurred for purposes of—

(i)

reducing water consumption by a public building or facility by not less than 30 percent,

(ii)

advanced water metering infrastructure, including the purchase, installation, and commissioning of advanced water meters and related software and infrastructure,

(iii)

investigation, design, or construction of a qualified groundwater remediation, desalination, or recycled water facility or system,

(iv)

increasing energy efficiency or the generation and use of renewable energy in the management, conveyance, or treatment of water, wastewater, or stormwater,

(v)

reducing water loss in a water distribution system, including training water system personnel, annual testing and calibration of meters, detecting and repairing leaks, and purchase and installation of related equipment, or

(vi)

establishing or improving a system for volumetric billing to enable utilities to base retail residential customer bills in whole or in part on the volume of metered water deliveries.

(b)

Effective date

The amendments made by this section shall take effect on the date of the enactment of this Act.

Arbitrage rules not to apply to prepayments for electricity

(a)

In general

Subsection (b) of section 148 of the Internal Revenue Code of 1986 is amended by adding at the end the following new paragraph:

(5)

Safe harbor for prepaid electricity supply contracts

(A)

In general

The term investment-type property does not include a prepayment under a qualified electricity supply contract.

(B)

Qualified electricity supply contract

(i)

In general

For purposes of this paragraph, the term qualified electricity supply contract means—

(I)

any contract entered into by a water or sewer utility to acquire electricity for the use of such utility in providing water or sewer services to its customers, if such contract provides that the provider of such electricity under the contract will use not less than 75 percent of the prepayment described in subparagraph (A) to acquire, construct, or improve a qualified renewable energy facility, and

(II)

any contract to acquire electricity which is not described in subclause (I) which the Secretary determines does not constitute property of the type intended to be described in paragraph (2)(D).

(ii)

Water or sewer utility

The term water or sewer utility means a utility which is a governmental unit or is owned by a governmental unit and which provides—

(I)

water for residential, commercial, irrigation, or industrial use, or

(II)

sewer services for residential, commercial, or industrial use,

to retail or wholesale customers in the service territory of such utility.

(iii)

Qualified renewable energy facility

The term qualified renewable energy facility means a qualified facility within the meaning of section 45(d) (without regard to paragraphs (8) and (10) thereof, to the placed in service date of such facility, and to the person who owns such facility) which is located in the United States.

(iv)

Use of water or sewer utility

For purposes of clause (i)(I), a contract shall be treated as providing electricity for the use of a water or sewer utility if the sum of—

(I)

the total number of kilowatt hours of electricity purchased under such contract and any other contracts for the purchase of electricity by such utility in effect on the date of the execution of such contract, plus

(II)

the amount of electricity expected to be generated by any generating facilities owned and used by such utility,

does not exceed by more than 10 percent the total kilowatt hours of electricity expected to be used by such utility during the term of such contract for the purpose of providing water or sewer services to its customers or for resale to other water or sewer utilities for their use (and not for resale to any entity that is not a water or sewer utility).

(C)

Other rules

Rules similar to the rules of subparagraphs (D)(ii), (G), and (I) of paragraph (4) shall apply for purposes of this paragraph.

(b)

Private loan financing test not To apply to prepayments for electricity

Paragraph (2) of section 141(c) of the Internal Revenue Code of 1986 is amended—

(1)

by striking or at the end of subparagraph (B),

(2)

by striking the period at the end of subparagraph (C) and inserting , or, and

(3)

by adding at the end the following new subparagraph:

(D)

is a qualified electricity supply contract (as defined in section 148(b)(5)).

(c)

Effective date

The amendments made by this section shall apply to obligations issued after the date of the enactment of this Act.