[Congressional Bills 117th Congress]
[From the U.S. Government Publishing Office]
[S. 4139 Introduced in Senate (IS)]
<DOC>
117th CONGRESS
2d Session
S. 4139
To amend the Internal Revenue Code of 1986 to establish a tax credit
for manufacturers of high-efficiency heat pumps and heat pump water
heaters.
_______________________________________________________________________
IN THE SENATE OF THE UNITED STATES
May 4, 2022
Ms. Klobuchar (for herself, Ms. Smith, Mr. Hickenlooper, Mr.
Whitehouse, Mr. Leahy, Mr. Merkley, and Mr. Booker) 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 establish a tax credit
for manufacturers of high-efficiency heat pumps and heat pump water
heaters.
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 ``Heating Efficiency and Affordability
through Tax Relief Act'' or the ``HEATR Act''.
SEC. 2. ENERGY EFFICIENT PROPERTY 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 inserting after
section 45L the following:
``SEC. 45M. ENERGY EFFICIENT HEAT PUMP CREDIT.
``(a) Establishment of Credit.--
``(1) In general.--For purposes of section 38, the energy
efficient heat pump credit determined under this section for
any taxable year is an amount equal to the sum of the credit
amounts determined under paragraph (2) for each type of
qualified energy efficient heat pump produced by the taxpayer
during the calendar year ending with or within the taxable
year.
``(2) Credit amounts.--The credit amount determined for any
type of qualified energy efficient heat pump is--
``(A) the applicable amount determined under
subsection (b) with respect to such type, multiplied by
``(B) the eligible production for such type, as
determined under subsection (c).
``(b) Applicable Amount.--For purposes of subsection (a) and
subject to subsections (f) and (h)(4), the applicable amount shall be
determined as follows:
``(1) Heat pump water heaters.--
``(A) Consumer heat pump water heaters.--In the
case of a consumer heat pump water heater which meets
the requirements of the Energy Star Water Heater
program which are in effect at the time that such water
heater is produced by the taxpayer, the applicable
amount shall be--
``(i) in the case of a water heater with a
volume of less than 55 gallons, $600, or
``(ii) in the case of a water heater with a
volume of not less than 55 gallons, $800.
``(B) Commercial heat pump water heaters.--In the
case of a commercial heat pump water heater which meets
the requirements of the Energy Star Commercial Water
Heater program which are in effect at the time that
such water heater is produced by the taxpayer, the
applicable amount shall be the amount equal to the
product of--
``(i) the heating capacity of such water
heater, expressed in Btus per hour, multiplied
by
``(ii) 2.4 cents.
``(2) Heat pumps.--
``(A) Consumer unitary heat pumps.--
``(i) In general.--In the case of a
consumer unitary heat pump, the applicable
amount shall be--
``(I) in the case of a heat pump
which satisfies the applicable
requirement under clause (ii)--
``(aa) in the case of a
heat pump which is a ducted
system with a heating capacity
of not less than 22,000 Btus
per hour and which satisfies
the Energy Star Energy-
Efficient Criteria for
Certified Residential Cold
Climate Heat Pumps or the
Energy Star Energy-Efficient
Criteria for Geothermal Heat
Pumps which are in effect at
the time that such heat pump is
produced by the taxpayer,
$1,000,
``(bb) in the case of an
electric heat pump which is not
described in item (aa) and is
produced during any calendar
year beginning after December
31, 2023, by a taxpayer which
has not produced any consumer
central air conditioner units
during such calendar year,
$600, or
``(cc) in the case of a
heat pump which is not
described in item (aa) or (bb),
$400, and
``(II) subject to clause (iii), in
the case of a heat pump which does not
satisfy the applicable requirement
under clause (ii) and is produced
during any calendar year beginning
after December 31, 2023, by a taxpayer
which has not produced any consumer
central air conditioner units during
such calendar year, $600.
``(ii) Additional requirement.--The
requirement described in this clause is the
Energy Star Central Air Conditioner and Air
Source Heat Pump Specification which is in
effect at the time that the heat pump is
produced by the taxpayer.
``(iii) Limitation.--For purposes of clause
(i)(II), if the total number of heat pumps
described in such clause which are produced by
the taxpayer during any calendar year beginning
after December 31, 2023, exceeds the number of
heat pumps described in clause (i)(I)(bb) which
are produced by the taxpayer during such
calendar year, clause (i)(II) shall not apply
with respect to the amount of such excess.
``(B) Commercial heat pumps.--
``(i) In general.--In the case of a
commercial heat pump which satisfies the
applicable requirements under clause (ii), the
applicable amount shall be the amount equal to
the product of--
``(I) the heating capacity of such
heat pump, expressed in Btus per hour,
multiplied by
``(II) 2.4 cents.
``(ii) Requirements.--The requirement
described in this clause is--
``(I) in the case of an air-source
unitary heat pump which has a cooling
capacity of not greater than 240,000
Btus per hour, such heat pump
satisfies--
``(aa) the requirements of
the Energy Star Light
Commercial HVAC program which
are in effect at the time that
such heat pump is produced by
the taxpayer, or
``(bb) the highest
efficiency tier (not including
any advanced tier) established
by the Consortium for Energy
Efficiency which is in effect
at the time that such heat pump
is produced by the taxpayer, or
``(II) in the case of any heat pump
which is not described in subclause
(I), such heat pump exceeds the minimum
efficiency standards under Reference
Standard 90.1 by not less than 10
percent, as determined under testing
conditions specified in Reference
Standard 90.1.
``(iii) Heating capacity.--For purposes of
clause (i)(I), in the case of an air-source
heat pump, the heating capacity of such heat
pump shall be determined using an ambient
temperature of 17 degrees Fahrenheit.
``(C) Industrial heat pump.--In the case of an
industrial heat pump, the applicable amount shall be
the amount equal to the product of--
``(i) the heating capacity of such heat
pump, expressed in Btus per hour, multiplied by
``(ii)(I) in the case of a heat pump with a
heating capacity of not greater than 2,400,000
Btus per hour, 3.6 cents, or
``(II) in the case of a heat pump with a
heating capacity greater than 2,400,000 Btus
per hour and a coefficient of performance of
not less than 2.0, 1.8 cents.
``(c) Eligible Production.--Subject to subsection (h)(4), the
eligible production in a calendar year with respect to each type of
qualified energy efficient heat pump is the excess of--
``(1) the number of heat pumps of such type which are
produced by the taxpayer in the United States during such
calendar year, over
``(2) the average number of heat pumps of such type which
were produced by the taxpayer (or any predecessor) in the
United States during the preceding 3-calendar year period.
``(d) Types of Qualified Energy Efficient Heat Pumps.--For purposes
of this section, the types of qualified energy efficient heat pumps
are--
``(1) consumer heat pump water heaters described in
subparagraph (A) of subsection (b)(1),
``(2) commercial heat pump water heaters described in
subparagraph (B) of such subsection,
``(3) consumer unitary heat pumps described in subparagraph
(A)(i) of subsection (b)(2),
``(4) commercial heat pumps described in subparagraph
(B)(i) of such subsection, and
``(5) industrial heat pumps described in subparagraph (C)
of such subsection.
``(e) Limitations.--
``(1) Aggregate credit amount allowed.--The aggregate
amount of credit allowed under subsection (a) with respect to a
taxpayer for any taxable year shall not exceed an amount equal
to the sum of--
``(A) with respect to any consumer unitary heat
pumps described in subsection (b)(2)(A)(i)(I)(bb),
$300,000,000 reduced by the amount of the credit
allowed under subsection (a) to the taxpayer (or any
predecessor) with respect to such heat pumps for all
prior taxable years beginning after December 31, 2023,
plus
``(B) with respect to any qualified energy
efficient heat pumps (including any consumer unitary
heat pumps described in subsection (b)(2)(A)(i)(I)(bb)
which are not included under subparagraph (A)),
$400,000,000 reduced by the amount of the credit
allowed under subsection (a) to the taxpayer (or any
predecessor) with respect to such heat pumps for all
prior taxable years beginning after December 31, 2021.
``(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 4 percent of
the average annual gross receipts of the taxpayer for the 3
taxable years preceding the taxable year in which the credit is
determined.
``(3) Gross receipts.--For purposes of this subsection, the
rules of paragraphs (2) and (3) of section 448(c) shall apply.
``(f) Adjustment of Energy Efficiency Criteria and Test
Procedures.--
``(1) Adjustment of energy efficiency criteria for
industrial heat pumps.--Not later than December 31, 2023, and
every 2 years thereafter, the Secretary, in consultation with
the Secretary of Energy, shall--
``(A) review the requirement with respect to
coefficient of performance for industrial heat pumps
under subsection (b)(2)(C)(ii)(II), and
``(B) as necessary, prescribe regulations or other
guidance which revise any such requirement to ensure
that--
``(i) the credit allowed under subsection
(a) only applies to industrial heat pumps which
are the most efficient industrial heat pumps
that are commercially available, and
``(ii) not less than 3 manufacturers
produce such heat pumps across a range of
product heating capacities.
``(2) Test methods and procedures.--
``(A) Industrial heat pumps.--Not later than the
date which is 12 months after the date of enactment of
this Act, the Secretary of Energy shall prescribe
regulations or other guidance which establish test
methods and procedures to determine the coefficient of
performance for industrial heat pumps.
``(B) ANSI and iso test methods and procedures.--
For purposes of developing the test methods and
procedures described in subparagraph (A), the Secretary
of Energy shall expand upon any relevant test methods
and procedures established by the American National
Standards Institute and the International Organization
for Standardization which are in effect as of the date
of enactment of the Heating Efficiency and
Affordability through Tax Relief Act.
``(g) Definitions.--In this section--
``(1) Btus.--The term `Btus' means British thermal units.
``(2) Coefficient of performance.--
``(A) In general.--The term `coefficient of
performance' means the ratio of heat output to energy
input.
``(B) Default.--Until such time as the Secretary of
Energy issues regulations or guidance under subsection
(f)(2), in the case of any industrial heat pump, any
determination with respect to coefficient of
performance for purposes of this section shall be
determined using any test methods or procedures
employed by the taxpayer which produced such heat pump,
provided that such taxpayer makes any test conditions
and assumptions with respect to such methods or
procedures publicly available.
``(3) Commercial heat pump.--The term `commercial heat
pump' means a heat pump which--
``(A) is designed to provide space heating and
cooling, and
``(B) is not described in subparagraph (B) of
paragraph (6).
``(4) Commercial heat pump water heater.--The term
`commercial heat pump water heater' means a water heater which
uses a heat pump to heat water and is not described in
subparagraph (A) or (B) of paragraph (5).
``(5) Consumer heat pump water heater.--The term `consumer
heat pump water heater' means a water heater which uses a heat
pump to heat water and has a maximum current rating of 24
amperes at a voltage not greater than 250 volts.
``(6) Consumer unitary heat pump.--The term `consumer
unitary heat pump' means a heat pump which--
``(A) is designed to provide space heating and
cooling, and
``(B) has a cooling capacity of not greater than
65,000 Btus per hour.
``(7) Industrial heat pump.--The term `industrial heat
pump' means a heat pump which--
``(A) upgrades industrial waste heat to a higher
temperature, and
``(B) such heat is produced and supplied to an
industrial facility in a manner which is more energy
efficient than conventional heating methods, such as a
steam or electric resistance boiler.
``(8) Qualified energy efficient heat pump.--The term
`qualified energy efficient heat pump' means--
``(A) any consumer heat pump water heater described
in subparagraph (A) of subsection (b)(1),
``(B) any commercial heat pump water heater
described in subparagraph (B) of such subsection,
``(C) any consumer unitary heat pump described in
subparagraph (A) of subsection (b)(2),
``(D) any commercial heat pump described in
subparagraph (B) of such subsection, and
``(E) any industrial heat pump described in
subparagraph (C) of such subsection.
``(9) Produced.--The term `produced' includes manufactured
or assembled.
``(10) Reference standard 90.1.--The term `Reference
Standard 90.1' means, with respect to any heat pump, the most
recent Standard 90.1 published by the American Society of
Heating, Refrigerating, and Air Conditioning Engineers which is
in effect at the time that such heat pump is produced by the
taxpayer.
``(h) Special Rules.--For purposes of this section--
``(1) In general.--Rules similar to the rules of
subsections (c), (d), and (e) of section 52 shall apply.
``(2) Controlled group.--
``(A) In general.--All persons treated as a single
employer under subsection (a) or (b) of section 52 or
subsection (m) or (o) of section 414 shall be treated
as a single producer.
``(B) Inclusion of foreign corporations.--For
purposes of subparagraph (A), in applying subsections
(a) and (b) of section 52 to this section, section 1563
shall be applied without regard to subsection (b)(2)(C)
thereof.
``(3) Verification.--No amount shall be allowed as a credit
under subsection (a) with respect to which the taxpayer has not
submitted such information or certification as the Secretary,
in consultation with the Secretary of Energy, determines
necessary.
``(4) 10 percent increase in applicable amount for heat
pumps produced in union facilities.--In the case of any
qualified energy efficient heat pump which is produced in a
facility operating under a collective bargaining agreement
negotiated by an employee organization (as defined in section
412(c)(4)), determined in a manner consistent with section
7701(a)(46), for purposes of determining the credit amount
under subsection (a)(2) with respect to such heat pump, the
applicable amount determined under subsection (b) with respect
to such heat pump shall be increased by an amount equal to 10
percent of the applicable amount otherwise in effect under such
subsection.
``(i) Election for Direct Payment.--
``(1) In general.--In the case of a taxpayer making an
election (at such time and in such manner as the Secretary may
provide) under this subsection with respect to any credit
determined under subsection (a) with respect to such taxpayer,
such taxpayer shall be treated as making a payment against the
tax imposed by subtitle A (for the taxable year with respect to
which such credit was determined) equal to the amount of such
credit.
``(2) Special rules.--For purposes of this subsection--
``(A) Application to partnerships and s
corporations.--
``(i) In general.--In the case of any
credit determined under subsection (a) with
respect to any property produced by a
partnership or S corporation, if such
partnership or S corporation makes an election
under paragraph (1) (in such manner as the
Secretary may provide) with respect to such
credit--
``(I) the Secretary shall make a
payment to such partnership or S
corporation equal to the amount of such
credit,
``(II) paragraph (4) shall be
applied with respect to such credit
before determining any partner's
distributive share, or shareholder's
pro rata share, of such credit,
``(III) any amount with respect to
which the election in paragraph (1) is
made shall be treated as tax exempt
income for purposes of sections 705 and
1366, and
``(IV) a partner's distributive
share of such tax exempt income shall
be based on such partner's distributive
share of such credit for each taxable
year.
``(ii) Coordination with application at
partner or shareholder level.--In the case of
any partnership or S corporation, paragraph (1)
shall be applied at the partner or shareholder
level after application of clause (i)(II).
``(B) Elections.--Any election under paragraph (1)
shall be made not later than the due date (including
extensions of time) for the return of tax for the
taxable year for which the election is made. Any such
election, once made, shall be irrevocable. Any election
under paragraph (1) shall apply with respect to any
credit for the taxable year for which the election is
made.
``(C) Timing.--The payment described in paragraph
(1) shall be treated as made on the later of the due
date (determined without regard to extensions) of the
return of tax for the taxable year or the date on which
such return is filed.
``(D) Treatment of payments to partnerships and s
corporations.--For purposes of section 1324 of title
31, United States Code, the payments under subparagraph
(A)(i)(I) shall be treated in the same manner as a
refund due from a credit provision referred to in
subsection (b)(2) of such section.
``(E) Additional information.--As a condition of,
and prior to, a payment under this subsection, the
Secretary may require such information or registration
as the Secretary deems necessary or appropriate for
purposes of preventing duplication, fraud, improper
payments, or excessive payments under this subsection.
``(F) Excessive payment.--
``(i) In general.--In the case of a payment
made to a taxpayer under this paragraph or any
amount treated as a payment which is made by
the taxpayer under paragraph (1) which the
Secretary determines constitutes an excessive
payment, the tax imposed on such taxpayer by
chapter 1 for the taxable year in which such
determination is made shall be increased by an
amount equal to the sum of--
``(I) the amount of such excessive
payment, plus
``(II) an amount equal to 20
percent of such excessive payment.
``(ii) Reasonable cause.--Clause (i)(II)
shall not apply if the taxpayer demonstrates to
the satisfaction of the Secretary that the
excessive payment resulted from reasonable
cause.
``(iii) Excessive payment defined.--For
purposes of this subparagraph, the term
`excessive payment' means, with respect to an
election is made under this subsection for any
taxable year, an amount equal to the excess
of--
``(I) the amount of the payment
made to the taxpayer under this
paragraph or any amount treated as a
payment which is made by the taxpayer
under paragraph (1) for such taxable
year, over
``(II) the amount of the credit
which, without application of this
paragraph, would be otherwise allowable
(determined without regard to section
38(c)) under subsection (a) for such
taxable year.
``(3) Denial of double benefit.--In the case of a taxpayer
making an election under this subsection with respect to the
credit allowed under subsection (a), such credit shall be
reduced to zero and shall, for any other purposes under this
title, be deemed to have been allowed to the taxpayer for such
taxable year.
``(4) Mirror code possessions.--In the case of any
possession of the United States with a mirror code tax system
(as defined in section 24(k)), this subsection shall not be
treated as part of the income tax laws of the United States for
purposes of determining the income tax law of such possession
unless such possession elects to have this subsection be so
treated.
``(5) Regulations.--The Secretary shall issue such
regulations or other guidance as may be necessary or
appropriate to carry out the purposes of this subsection,
including--
``(A) regulations or other guidance providing rules
for determining a partner's distributive share of the
tax exempt income described in paragraph
(2)(A)(i)(III), and
``(B) guidance to ensure that the amount of the
payment or deemed payment made under this subsection is
commensurate with the amount of the credit that would
be otherwise allowable (determined without regard to
section 38(c)).
``(j) Termination.--This section shall not apply with respect to
any property produced after December 31, 2031.''.
(b) Conforming Amendments.--
(1) Section 38(b) of the Internal Revenue Code of 1986 is
amended--
(A) by redesignating paragraphs (26) through (33)
as paragraphs (27) through (34), respectively, and
(B) by inserting after paragraph (25) the
following:
``(26) the energy efficient heat pump credit determined
under section 45M,''.
(2) 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 inserting after the item relating to section 45L
the following item:
``Sec. 45M. Energy efficient heat pump credit.''.
(c) Effective Date.--The amendments made by this section shall
apply to property produced after the date of enactment of this Act.
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