Text: H.R.2828 — 109th Congress (2005-2006)All Bill Information (Except Text)

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Introduced in House (06/09/2005)


109th CONGRESS
1st Session
H. R. 2828

To ensure that the United States leads the world in developing and manufacturing next generation energy technologies, to grow the economy of the United States, to create new highly trained, highly skilled American jobs, to eliminate American overdependence on foreign oil, and to address the threat of global warming.


IN THE HOUSE OF REPRESENTATIVES
June 9, 2005

Mr. Inslee (for himself, Mr. Van Hollen, Mr. Holt, Mr. Israel, Mr. Honda, Mr. McDermott, Mr. Larsen of Washington, Mr. Jackson of Illinois, Ms. Schakowsky, Mr. Langevin, Mr. Grijalva, Mr. Emanuel, Ms. Baldwin, Mr. George Miller of California, and Mr. Smith of Washington) introduced the following bill; which was referred to the Committee on Energy and Commerce, and in addition to the Committees on Science, Ways and Means, Financial Services, Transportation and Infrastructure, Education and the Workforce, Government Reform, and Agriculture, for a period to be subsequently determined by the Speaker, in each case for consideration of such provisions as fall within the jurisdiction of the committee concerned


A BILL

To ensure that the United States leads the world in developing and manufacturing next generation energy technologies, to grow the economy of the United States, to create new highly trained, highly skilled American jobs, to eliminate American overdependence on foreign oil, and to address the threat of global warming.

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

SECTION 1. Short title; table of contents.

(a) Short title.—This Act may be cited as the “New Apollo Energy Act of 2005”.

(b) Table of contents.—The table of contents of this Act is as follows:


Sec. 1. Short title; table of contents

Sec. 101. Findings

Sec. 102. Performance goals

Sec. 201. Authorization of appropriations

Sec. 202. Participation

Sec. 203. Cost sharing

Sec. 204. Education and outreach

Sec. 205. Definition

Sec. 211. Definitions

Sec. 212. Enhanced clean energy research, development, and demonstration

Sec. 221. Enhanced energy efficiency research, development, and demonstration

Sec. 222. Enhanced aeronautical system energy efficiency research, development, and public-private partnership

Sec. 223. Next Generation Lighting Initiative

Sec. 224. National Building Performance Initiative

Sec. 231. Plan for fusion experiment

Sec. 232. Definitions

Sec. 241. Program authority

Sec. 242. Ultra-deepwater and extended reach drilling and carbon sequestration and unconventional technologies program

Sec. 243. Sunset

Sec. 244. Definitions

Sec. 301. References

Sec. 302. Administration of title

Sec. 311. Extension through 2015 for placing qualified facilities in service for producing renewable electric energy

Sec. 312. Expansion and modification of renewable resource credit

Sec. 313. Tradable renewable resource credit for public utilities and other tax exempt organizations

Sec. 314. Alternative motor vehicle credit

Sec. 315. Modification of credit for qualified electric vehicles

Sec. 316. Extension of biodiesel tax credits

Sec. 317. Credit for retail sale of alternative fuels as motor vehicle fuel

Sec. 318. Study of effectiveness of certain provisions by GAO

Sec. 319. Extension of deduction for certain refueling property

Sec. 320. Credit for installation of alternative fueling stations

Sec. 321. Incentive for certain energy efficient property used in business

Sec. 322. Energy efficient commercial buildings deduction

Sec. 323. Credit for construction of new highly energy-efficient homes

Sec. 324. Credit for energy efficient appliances

Sec. 325. Credit for distributed energy generation and demand management property

Sec. 326. Credit for energy efficient recycling or remanufacturing equipment

Sec. 327. Credit for distributed energy generation and demand management property used in residences

Sec. 328. Credit for energy management systems using residential real time metering systems

Sec. 329. Credit for flywheel property

Sec. 330. Credits for clean coal

Sec. 331. Tax incentives for retooling and investment in new facilities and assets to produce energy efficiency technologies and domestic clean energy production technologies

Sec. 332. Special rules for automotive industry

Sec. 333. Special rules for high-capacity airplanes

Sec. 334. New electricity transmission lines designed primarily to carry electricity from renewable energy resources

Sec. 335. New energy technologies commission

Sec. 336. Expenditure limitation

Sec. 401. Improved coordination of technology transfer activities

Sec. 402. Federal support for commercialization of new technologies

Sec. 403. Clean energy technology exports program

Sec. 404. International energy technology deployment program

Sec. 405. Risk pool for qualifying advanced clean energy technology

Sec. 406. Federal renewable and clean energy use

Sec. 407. Require the Export-Import Bank of the United States to meet renewable energy targets in its lending practices

Sec. 408. Grants for transit programs

Sec. 409. Grants for water and sewer improvement programs

Sec. 410. Loans for high-efficiency vehicles

Sec. 411. Requirement regarding purchase of motor vehicles by Executive agencies

Sec. 412. Federal energy efficiency

Sec. 413. Federal agency ethanol-blended gasoline and biodiesel purchasing requirement

Sec. 414. Permitting of wind energy development projects on public lands

Sec. 415. Energy savings performance contracts

Sec. 416. Municipality grants for distributed energy plans

Sec. 417. Green building standards for Federal buildings

Sec. 501. Strategic Petroleum Reserve

Sec. 502. Regulatory oversight over energy trading markets and metals trading markets

Sec. 503. Increased funding for liheap, weatherization assistance

Sec. 504. National energy efficient housing

Sec. 505. National net metering requirement for utilities and interconnection standards for distributive energy generation

Sec. 506. Appliance standards

Sec. 507. Energy Star certification for solar water heaters

Sec. 508. Electric reliability standards

Sec. 600. Definitions

Sec. 601. National Science Foundation fellowships

Sec. 602. Research grants

Sec. 603. Abrupt climate change research

Sec. 604. NIST greenhouse gas functions

Sec. 605. Development of new measurement technologies

Sec. 606. Enhanced environmental measurements and standards

Sec. 607. Technology development and diffusion

Sec. 608. Agricultural outreach program

Sec. 609. NOAA report on climate change effects; preparation assistance

Sec. 611. National Greenhouse Gas Database and registry established

Sec. 612. Inventory of greenhouse gas emissions for covered entities

Sec. 613. Greenhouse gas reduction reporting

Sec. 614. Measurement and verification

Sec. 621. Covered entities must submit allowances for emissions

Sec. 622. Compliance

Sec. 623. Borrowing against future reductions

Sec. 624. Other uses of tradeable allowances

Sec. 625. Exemption of source categories

Sec. 631. Establishment of tradeable allowances

Sec. 632. Determination of tradeable allowance allocations

Sec. 633. Allocation of tradeable allowances

Sec. 634. Ensuring target adequacy

Sec. 635. Initial allocations for early participation and accelerated participation

Sec. 636. Bonus for accelerated participation

Sec. 641. Establishment

Sec. 642. Purposes and functions

Sec. 651. Penalties

Sec. 652. Sequestration accounting

Sec. 701. Renewable fuels standard

Sec. 702. Elimination of oxygen content requirement for reformulated gasoline

Sec. 703. Public health and environmental impacts of fuels and fuel additives

Sec. 704. Analyses of motor vehicle fuel changes

Sec. 705. Additional Opt-in areas under reformulated gasoline program

Sec. 706. Federal enforcement of State fuels requirements

Sec. 707. Fuel system requirements harmonization study

Sec. 708. Report on renewable motor fuel

Sec. 711. Renewable portfolio standard

Sec. 721. Oil savings

Sec. 722. Determination of Equivalency between CAFE credits and greenhouse gas credits

Sec. 723. Elimination of 2–FLEET rule

Sec. 731. Loan guarantees for biorefineries and renewable energy production facilities

Sec. 801. References

Sec. 811. Tax reductions limited to revenue raised by tax offsets

Sec. 821. Denial of treaty benefits for certain deductible payments

Sec. 831. Findings and purpose

Sec. 832. Clarification of economic substance doctrine

Sec. 833. Penalty for understatements attributable to transactions lacking economic substance, etc

Sec. 834. Understatement of taxpayer’s liability by income tax return preparer

Sec. 835. Frivolous tax submissions

Sec. 836. Expanded authority to disallow tax benefits under section 269

SEC. 101. Findings.

(a) Findings.—The Congress finds the following:

(1) The United States imports over half the oil it consumes and consumes about one fourth of the world’s daily oil production.

(2) According to present trends, the United States reliance on foreign oil will increase to 68 percent of total consumption by 2025.

(3) Having only 3 percent of the world’s known oil reserves, the health of the United States economy is dependent on world oil prices.

(4) World oil prices are overwhelmingly dictated by countries other than the United States, particularly by the member countries of the Organization of Petroleum Exporting Countries.

(5) A major portion of the world’s oil supply is controlled by unstable governments and countries that are known to finance, harbor, or otherwise support terrorists and terrorist activities.

(6) Since World War II, the United States has made significant expenditures of American taxpayer dollars in attempts to stabilize governments and protect American interests in the Middle East.

(7) Countries such as Japan, Germany, Denmark, and Great Britain lead the United States in manufacturing alternative energy technologies that both decrease reliance on fossil fuels and do not contribute to global warming.

(8) The United States has led the world in the development of a wide array of technological advances and is now poised to lead the world, using its unique national genius for innovation, in the development of a host of new energy technologies.

(9) Development of renewable energy resources in the United States offers a substantial opportunity for economic development in rural, agriculture-dependent areas.

(10) A bold new national energy plan can lead to a surge of investment in, development of, and deployment of clean energy and energy efficient technologies that would result in the creation of millions of highly trained manufacturing and technical jobs throughout the American economy.

(11) Innovative uses of tax incentives to encourage the manufacturing of new clean energy technologies in the United States will help create American jobs, decrease America’s dependence on foreign oil, and address pressing environmental concerns, and are preferable to large tax breaks for the wealthiest in society.

(12) Human activities have caused rapid increases in atmospheric concentrations of carbon dioxide and other greenhouse gases in the last century.

(13) According to the Intergovernmental Panel on Climate Change and the National Research Council—

(A) the Earth has warmed in the last century; and

(B) the majority of the observed warming is attributable to human activities, including fossil fuel-generated carbon dioxide emissions.

(14) Despite the fact that many uncertainties in climate science remain, the potential impacts from human-induced climate change pose a substantial risk that should be managed in a responsible manner.

(15) The United States has ratified the UNFCCC (United Nations Framework Convention on Climate Change), which states, in part, “the Parties to the Convention are to implement policies with the aim of returning to their 1990 levels anthropogenic emissions of carbon dioxide and other greenhouse gases”.

(16) Global warming poses a significant threat to national security, the American economy, public health and welfare, and the global environment. According to a report commissioned by the Department of Defense in 2003 entitled “An Abrupt Climate Change Scenario and its Implications for United States National Security”, the risk of abrupt climate change due to global warming should be elevated beyond a scientific debate to a US national security concern.

SEC. 102. Performance goals.

(a) New Apollo Energy Act Performance Goals.—In order to ensure that the national energy policy of the United States is the most effective policy for protecting national and homeland security, expanding our economy and creating jobs, addressing global warming and environmental health concerns, and protecting the interests of American consumers, Congress establishes the New Apollo Energy Act Performance Goals, which the President shall consider when formulating and enforcing national energy policy. These goals are to—

(1) reduce demand for oil in the United States by at least 600,000 barrels per day from the demand for oil projected by the Energy Information Administration for 2010, 1,700,000 barrels per day from projected demand for oil in 2015, and 3,000,000 barrels per day from projected demand for oil in 2020;

(2) create and retain 3,000,000 new highly skilled, high-waged jobs in the United States by 2015;

(3) meet 15 percent of the country’s electricity needs from electricity generated from renewable resources by 2015, and 5 percent of the country’s electricity needs from electricity generated from carbon-based zero emission carbon dioxide sources by 2015;

(4) produce 8,100,000,000 gallons per year of renewable fuels, including traditional ethanol, cellulose ethanol, and biodiesel by 2013 without creating regional cost disparities for fuel;

(5) lower energy costs for consumers by meeting 25 percent of energy supply needs, as projected for the year 2013 by the Energy Information Administration, through increased conservation and improved energy efficiency;

(6) maximize long-term production of existing domestic marginal and stripper oil reserves;

(7) encourage stable energy prices and markets by promoting energy production and energy infrastructure modernization, while maintaining existing environmental protections;

(8) reduce total carbon dioxide emissions in the United States to 5,806,100,000 metric tons per year by 2015;

(9) encourage domestic manufacturing and production of new energy and energy efficient technologies;

(10) redevelop and enhance existing industrial facilities in areas of the country adversely impacted by manufacturing job losses; and

(11) promote rural economic development.

SEC. 201. Authorization of appropriations.

There are authorized to be appropriated for carrying out this title $36,000,000,000.

SEC. 202. Participation.

The Secretary of Energy, in collaboration with the Secretary of Commerce, shall coordinate the participation of National Laboratories, universities, commercial industry, and other organizations in carrying out this title.

SEC. 203. Cost sharing.

(a) In general.—Unless otherwise specified, the Secretary shall require a commitment from non-Federal sources of at least 20 percent of the cost of proposed research and development projects under this title.

(b) Reduction or elimination.—The Secretary may reduce or eliminate the cost sharing requirement under subsection (a)—

(1) if the Secretary determines that the research and development is of a basic or fundamental nature; or

(2) for technical analyses, outreach activities, and educational programs that the Secretary does not expect to result in a marketable product.

SEC. 204. Education and outreach.

(a) Program.—The Secretary of Energy shall establish a program of education and outreach, including innovative education and outreach techniques, on renewable energy and energy efficiency technologies to manufacturers, consumers, engineers, architects, builders, energy service companies, universities, facility planners and managers, State and local governments, and other appropriate entities.

(b) Authorization of appropriations.—There are authorized to be appropriated to the Secretary of Energy for carrying out this section $100,000,000 for each of the fiscal years 2006 through 2009, and such sums as may be necessary for each of the fiscal years 2010 through 2022.

SEC. 205. Definition.

For purposes of this title, the term “National Laboratory” means any of the following laboratories owned by the Department of Energy:

(1) Ames National Laboratory.

(2) Argonne National Laboratory.

(3) Brookhaven National Laboratory.

(4) Fermi National Laboratory.

(5) Idaho National Engineering and Environmental Laboratory.

(6) Lawrence Berkeley National Laboratory.

(7) Lawrence Livermore National Laboratory.

(8) Los Alamos National Laboratory.

(9) National Energy Technology Laboratory.

(10) National Renewable Energy Laboratory.

(11) Oak Ridge National Laboratory.

(12) Pacific Northwest National Laboratory.

(13) Princeton Plasma Physics Laboratory.

(14) Sandia National Laboratories.

(15) Savannah River National Laboratory.

(16) Stanford Linear Accelerator Center.

(17) Thomas Jefferson National Accelerator Facility.

SEC. 211. Definitions.

For purposes of this subtitle—

(1) the term “biomass” means any organic matter that is available on a renewable or recurring basis, including agricultural crops and trees, wood and wood wastes and residues, plants (including aquatic plants), grasses, residues, fibers, animal wastes, and municipal wastes;

(2) the term “clean energy source” means—

(A) wind;

(B) biomass;

(C) a geothermal source;

(D) ocean waves;

(E) a solar source;

(F) a photovoltaic source;

(G) additional hydroelectric generation capacity achieved from increased efficiency at an existing hydroelectric dam; or

(H) minimal emission coal; and

(3) the term “minimal emission coal” means coal resources that result in zero or near zero emissions of sulfur dioxide, nitrogen oxides, and mercury, and 90 percent or more sequestration of carbon dioxide emissions.

SEC. 212. Enhanced clean energy research, development, and demonstration.

(a) Goals.—In order to achieve the goals stated in section 102 of this Act, the United States shall have an energy research, development, and demonstration program to enhance clean energy with the following goals:

(1) For wind power, the program should reduce the cost of wind-generated electricity by 40 percent by 2015, compared to the cost as of the date of the enactment of this Act, with concentration within the program on a variety of advanced wind turbine concepts, manufacturing technologies, and optimal demonstration locations.

(2) For photovoltaics, the programs should pursue research, development, and demonstration that would lead to photovoltaic systems with generation costs of 10 cents kWh by 2015, and 7 cents kWh by 2020. Program activities should include assisting industry in developing manufacturing technologies, giving greater attention to balance of system issues, and expanding fundamental research on relevant advanced materials.

(3) For solar thermal electric systems the program should strengthen ongoing research, development, and demonstration combining high-efficiency and high-temperature receivers with advanced thermal storage and power cycles, with the goal of making solar-only power (including baseload solar power) widely competitive with fossil fuel power by 2017.

(4) For geothermal energy, the program should continue work on hydrothermal systems, and reactivate research, development, and demonstration of advanced concepts, giving top priority to hot dryrock geothermal energy.

(5) For ocean wave energy, the program should reactivate and strengthen ongoing research, development, and demonstration programs that would lead to generating technologies for deriving electrical power from the ocean, including tidal power, wave power, and ocean thermal energy conversion.

(6) For stationary power generation, the Secretary shall work with domestic manufacturers and the utilities to encourage commercial production of cost-competitive, fuel cell power generating facilities. The program should provide new technologies that achieve an efficiency of 70–80 percent Lower Heating Value with an average cost of $400 per kilowatt by 2015.

(7) For biomass energy—

(A) the program should enable the United States to triple biomass energy use by 2010;

(B) for biomass-based power systems, the program should enable commercialization, within five years after the date of the enactment of this Act, of integrated power-generating technologies that employ gas turbines and fuel cells integrated with biomass gasifiers; and

(C) for biofuels, the program should accelerate research, development, and demonstration on advanced cellulosic conversion, including recalcitrance of biomass, feedstock development, and co-products development.

(8) For hydropower, the program should provide for a new generation of turbine technologies that will increase generating capacity and will be less damaging to fish and aquatic ecosystems.

(9) For electric energy systems and storage, the program should develop—

(A) technologies for generators and transmission, distribution, and storage systems that combine high capacity with high efficiency (particularly for electric transmission facilities in rural and remote areas);

(B) new transmission and distribution technologies, including flexible alternating current transmission systems, composite conductor materials, advanced protection devices, and controllers;

(C) technologies for interconnection of distributed energy resources with electric power systems;

(D) technologies to sequester 90 percent or more of carbon dioxide emissions;

(E) high-temperature superconducting materials for power delivery equipment such as transmission and distribution cables, transformers, and generators; and

(F) real-time transmission and distribution system control technologies that provide for continual exchange of information between generation, transmission, distribution, and end-user facilities.

(10) For minimum emission coal, the program shall pursue research that develops and demonstrates facilities generating electricity from coal, in a cost-competitive manner, that by 2020—

(A) remove 99 percent of total sulfur dioxide emissions;

(B) emit no more than .05 lbs of NOx per million BTU;

(C) achieve a 90 percent reduction in mercury emissions;

(D) sequester 90 percent or more of carbon dioxide emissions; and

(E) achieve a thermal efficiency of—

(i) 60 percent for coal of more than 9,000 Btu;

(ii) 59 percent for coal of 7,000 to 9,000 Btu; and

(iii) 57 percent for coal of less than 7,000 Btu.

(11) The Secretary shall work to maximize the production of hydrogen from clean energy sources.

(12) The Secretary shall support under this section any other technology that may help achieve the goals stated in section 102.

(b) Technical criteria for gasification.—In allocating the funds made available for minimum emission coal, the Secretary shall ensure that at least 80 percent of the funds are used for coal-based gasification technologies or coal-based projects that include gasification combined cycle, gasification fuel cells, gasification co-production, or hybrid gasification/combustion. The Secretary shall set technical milestones specifying emissions levels that coal gasification projects must be designed to, and can reasonably be expected to, achieve. The milestones shall get more restrictive through the life of the program.

(c) Coordination with other benefits.—The Secretary shall not provide assistance under this section to any person if such person has received assistance under section 642 or 731.

SEC. 221. Enhanced energy efficiency research, development, and demonstration.

(a) Goals.—In order to achieve the goal stated in section 102 of this Act, the United States shall have an energy research, development, and demonstration program to enhance energy efficiency with the following goals:

(1) For energy efficiency in housing, the program should develop technologies, housing components, designs, and production methods that will, by 2010—

(A) reduce the time needed to move energy-efficient technologies to market by 50 percent, compared to the time needed as of the date of the enactment of this Act;

(B) reduce the monthly cost of new housing by 20 percent, compared to the cost as of the date of the enactment of this Act;

(C) cut the environmental impact and energy use of new housing by 50 percent, compared to the impact and use as of the date of the enactment of this Act;

(D) ensure that at least 15,000,000 homes existing as of the date of the enactment of this Act reduce their total energy consumption by 30 percent, compared to the use as of the date of the enactment of this Act; and

(E) improve the durability and reduce maintenance costs of housing technology components by 50 percent compared to the durability and costs as of the date of the enactment of this Act.

(2) For industrial energy efficiency, the program should, in cooperation with the affected industries—

(A) develop a microturbine (40 to 300 kilowatt) that is greater than 40 percent more efficient by 2008, compared to the efficiency as of the date of the enactment of this Act;

(B) develop a microturbine that is greater than 50 percent more efficient by 2012, compared to the efficiency as of the date of the enactment of this Act;

(C) develop advanced materials for combustion systems that reduce emissions of nitrogen oxides by 30 to 50 percent while increasing efficiency 5 to 10 percent by 2010, compared to such emissions as of the date of the enactment of this Act; and

(D) improve the energy intensity of the major energy-consuming industries by at least 25 percent by 2012, compared to the energy intensity as of the date of the enactment of this Act.

(3) For transportation energy efficiency, the Secretary shall work with domestic automobile manufacturers to encourage commercial production of cost-competitive, highly fuel-efficient vehicles. In developing these public-private partnerships, the Secretary shall take into consideration the following:

(A) Hybrid gas/electric vehicles.

(B) Fuel cells.

(C) Alternative fuel driven engines.

(D) Maximizing the production of hydrogen from clean energy sources.

(4) The Secretary shall support under this section any other technology that may help achieve the goals stated in section 102.

(b) Definitions.—For purposes of this section—

(1) the term “alternative fuel” has the meaning given that term in section 301(2) of the Energy Policy Act of 1992; and

(2) the term “major energy-consuming industries” means—

(A) the forest product industry;

(B) the steel industry;

(C) the aluminum industry;

(D) the metal casting industry;

(E) the chemical industry;

(F) the petroleum refining industry; and

(G) the glass-making industry.

(c) Limits on use of funds.—None of the funds authorized to be appropriated under this section may be used for—

(1) the promulgation and implementation of energy efficiency regulations;

(2) the Weatherization Assistance Program under part A of title IV of the Energy Conservation and Production Act;

(3) the State Energy Program under part D of title III of the Energy Policy and Conservation Act; or

(4) the Federal Energy Management Program under part 3 of title V of the National Energy Conservation Policy Act.

SEC. 222. Enhanced aeronautical system energy efficiency research, development, and public-private partnership.

(a) Goals.—For aeronautical system energy efficiency, the Secretary of Energy, the Secretary of the Treasury, and the Secretary of Transportation shall develop for commercial production by 2008 a superefficient, high-capacity commercial airplane. To carry out this section, the Secretaries shall form a public-private partnership research and development loan program such that—

(1) the Federal Government enters into an agreement with a domestic commercial airplane manufacturer in which the Federal Government provides loans for up to 49 percent of the research and development cost; and

(2) the Federal Government receives repayment for loans under paragraph (1) from the commercial airplane manufacturer through a royalty system agreed upon by the Secretary of the Treasury.

(b) Definition.—For purposes of this section, the term “superefficient, high-capacity commercial airplane” means a commercial airplane with a passenger seating capacity of no less than 200 people with a range of at least 7,200 nautical miles which consumes at least 15 percent less fuel than comparable airplanes.

SEC. 223. Next Generation Lighting Initiative.

(a) In general.—The Secretary shall carry out a Next Generation Lighting Initiative in accordance with this section to support research, development, demonstration, and commercial application activities related to advanced solid-state lighting technologies based on white light emitting diodes.

(b) Objectives.—The objectives of the initiative shall be—

(1) to develop, by 2012, advanced solid-state lighting technologies based on white light emitting diodes that, compared to incandescent and fluorescent lighting technologies, are—

(A) longer lasting;

(B) more energy-efficient; and

(C) cost-competitive;

(2) to develop an inorganic white light emitting diode that has an efficiency of 160 lumens per watt and a 10-year lifetime; and

(3) to develop an organic white light emitting diode with an efficiency of 100 lumens per watt with a 5-year lifetime that—

(A) illuminates over a full color spectrum;

(B) covers large areas over flexible surfaces; and

(C) does not contain harmful pollutants, such as mercury, typical of fluorescent lamps.

(c) Fundamental research.—

(1) CONSORTIUM.—The Secretary shall carry out the fundamental research activities of the Next Generation Lighting Initiative through a private consortium (which may include private firms, trade associations and institutions of higher education), which the Secretary shall select through a competitive process. Each proposed consortium shall submit to the Secretary such information as the Secretary may require, including a program plan agreed to by all participants of the consortium.

(2) JOINT VENTURE.—The consortium shall be structured as a joint venture among the participants of the consortium. The Secretary shall serve on the governing council of the consortium.

(3) ELIGIBILITY.—To be eligible to be selected as the consortium under paragraph (1), an applicant must be broadly representative of United States solid-state lighting research, development, and manufacturing expertise as a whole.

(4) GRANTS.—(A) The Secretary shall award grants for fundamental research to the consortium, which the consortium may disburse to researchers, including those who are not participants of the consortium.

(B) To receive a grant, the consortium must provide a description to the Secretary of the proposed research and list the parties that will receive funding.

(C) At least 20 percent of the cost of a research and development project for which a grant is made under this section shall be matched by the consortium, and at least 50 percent of the cost of a demonstration or commercial application project for which a grant is made under this section shall be matched by the consortium.

(5) NATIONAL LABORATORIES.—National Laboratories may participate in the research described in this section, and may receive funds from the consortium.

(6) INTELLECTUAL PROPERTY.—Participants in the consortium and the Federal Government shall have royalty-free nonexclusive rights to use intellectual property derived from research funded pursuant to this subsection.

(d) Development, demonstration, and commercial application.—The Secretary shall carry out the development, demonstration, and commercial application activities of the Next Generation Lighting Initiative through awards to private firms, trade associations, and institutions of higher education. In selecting awardees, the Secretary may give preference to members of the consortium selected pursuant to subsection (c).

(e) Plans and assessments.—(1) The consortium shall formulate an annual operating plan which shall include research priorities, technical milestones, and plans for technology transfer, and which shall be subject to approval by the Secretary.

(2) The Secretary shall enter into an arrangement with the National Academy of Sciences to conduct periodic reviews of the Next Generation Lighting Initiative. The Academy shall review the research priorities, technical milestones, and plans for technology transfer established under paragraph (1) and evaluate the progress toward achieving them. The Secretary shall consider the results of such reviews in evaluating the plans submitted under paragraph (1).

(f) Audit.—The Secretary shall retain an independent, commercial auditor to perform an audit of the consortium to determine the extent to which the funds authorized by this section have been expended in a manner consistent with the purposes of this section. The auditor shall transmit a report annually to the Secretary, who shall transmit the report to the Congress, along with a plan to remedy any deficiencies cited in the report.

(g) Sunset.—The Next Generation Lighting Initiative shall terminate no later than September 30, 2013.

(h) Definitions.—As used in this section:

(1) ADVANCED SOLID-STATE LIGHTING.—The term “advanced solid-state lighting” means a semiconducting device package and delivery system that produces white light using externally applied voltage.

(2) FUNDAMENTAL RESEARCH.—The term “fundamental research” includes basic research on both solid-state materials and manufacturing processes.

(3) INORGANIC WHITE LIGHT EMITTING DIODE.—The term “inorganic white light emitting diode” means an inorganic semiconducting package that produces white light using externally applied voltage.

(4) ORGANIC WHITE LIGHT EMITTING DIODE.—The term “organic white light emitting diode” means an organic semiconducting compound that produces white light using externally applied voltage.

SEC. 224. National Building Performance Initiative.

(a) Interagency group.—Not later than 3 months after the date of enactment of this Act, the Director of the Office of Science and Technology Policy shall establish an interagency group to develop, in coordination with the advisory committee established under subsection (e), a National Building Performance Initiative (in this section referred to as the “Initiative”). The interagency group shall be cochaired by appropriate officials of the Department and the Department of Commerce, who shall jointly arrange for the provision of necessary administrative support to the group.

(b) Integration of efforts.—The Initiative shall integrate Federal, State, and voluntary private sector efforts to reduce the costs of construction, operation, maintenance, and renovation of commercial, industrial, institutional, and residential buildings.

(c) Plan.—Not later than 1 year after the date of enactment of this Act, the interagency group shall submit to Congress a plan for carrying out the appropriate Federal role in the Initiative. The plan shall include—

(1) research, development, demonstration, and commercial application of systems and materials for new construction and retrofit relating to the building envelope and building system components; and

(2) the collection, analysis, and dissemination of research results and other pertinent information on enhancing building performance to industry, government entities, and the public.

(d) Department of Energy role.—Within the Federal portion of the Initiative, the Department shall be the lead agency for all aspects of building performance related to use and conservation of energy.

(e) Advisory Committee.—

(1) ESTABLISHMENT.—The Director of the Office of Science and Technology Policy shall establish an advisory committee to—

(A) analyze and provide recommendations on potential private sector roles and participation in the Initiative; and

(B) review and provide recommendations on the plan described in subsection (c).

(2) MEMBERSHIP.—Membership of the advisory committee shall include representatives with a broad range of appropriate expertise, including expertise in—

(A) building research and technology;

(B) architecture, engineering, and building materials and systems; and

(C) the residential, commercial, and industrial sectors of the construction industry.

(f) Construction.—Nothing in this section provides any Federal agency with new authority to regulate building performance.

SEC. 231. Plan for fusion experiment.

(a) In general.—

(1) PRIORITY FOR INTERNATIONAL BURNING PLASMA PROJECT.—The Secretary of Energy (in this part referred to as “the Secretary”) is authorized to undertake full scientific and technological cooperation in the international burning plasma project known as ITER.

(2) ALTERNATIVE PROJECT.—If at any time during the negotiations on the ITER project, the Secretary determines that construction and operation of the ITER project is unlikely or infeasible, the Secretary shall send to Congress, as part of the budget request for the following year, a plan for implementing an alternative plan, such as the domestic burning plasma experiment known as FIRE, including costs and schedules for such a plan. The Secretary shall refine such plan in full consultation with the Fusion Energy Sciences Advisory Committee and shall also transmit such plan to the National Research Council for review.

(b) United States policy with respect to fusion energy science.—

(1) DECLARATION OF POLICY.—It shall be the policy of the United States to develop the scientific, engineering, and commercial infrastructure necessary to ensure that the United States is competitive with other nations in providing fusion energy for its own needs and the needs of other nations, including demonstrating electric hydrogen power production for national power grid utilizing fusion energy by the earliest date possible.

(2) FUSION ENERGY PLAN.—

(A) REQUIREMENT.—Within 6 months of the date of enactment of this Act, the Secretary shall transmit to Congress a plan for carrying out the policy set forth in paragraph (1), including cost estimates, proposed budgets, potential international partners, and specific programs for implementing such policy.

(B) REQUIREMENTS OF PLAN.—Such plan shall also ensure that—

(i) existing fusion research facilities are more fully utilized;

(ii) fusion science, technology, theory, advanced computation, modeling, and simulation are strengthened;

(iii) new magnetic and inertial fusion research facilities are selected based on scientific innovation, cost effectiveness, and their potential to advance the goal of practical fusion energy at the earliest date possible;

(iv) such facilities that are selected are funded at a cost-effective rate;

(v) communication of scientific results and methods between the fusion energy science community and the broader scientific and technology communities is improved;

(vi) inertial confinement fusion facilities are utilized to the extent practicable for the purpose of inertial fusion energy research and development; and

(vii) attractive alternative inertial and magnetic fusion energy approaches are more fully explored.

(C) REPORT ON FUSION MATERIALS AND TECHNOLOGY PROJECT.—In addition, the plan required by this section shall also address the status of, and to the degree possible, the costs and schedules for—

(i) the design and implementation of international or national facilities for the testing of fusion materials; and

(ii) the design and implementation of international or national facilities for the testing and development of key fusion technologies.

SEC. 232. Definitions.

As used in this part, the following definitions apply:

(1) The term “ITER” refers to the international fusion research project whose design is complete and whose location and financing is currently being negotiated between Japan, Europe, the Russian Federation, Canada, China, and the United States.

(2) The term “FIRE” refers to the Fusion Ignition Research Experiment, the fusion research experiment for which design work has been supported by the Department of Energy as a possible alternative burning plasma experiment in the event that the ITER project fails to move forward.

SEC. 241. Program authority.

(a) In general.—The Secretary shall carry out a program under this part of research, development, demonstration, and commercial application of technologies for ultra-deepwater and extended reach drilling and carbon sequestration.

(b) Program.—The program under this part shall address the following areas, including improving safety and minimizing environmental impacts of activities within each area:

(1) Ultra-deepwater technology.

(2) Ultra-deepwater architecture.

(3) Extended reach drilling.

(4) Sequestration of carbon.

(c) Limitation on location of field activities.—Field activities under the program under this part shall be carried out only—

(1) in—

(A) areas in the territorial waters of the United States not under any Outer Continental Shelf moratorium as of September 30, 2002;

(B) areas onshore in the United States on public land administered by the Secretary of the Interior available for oil and gas leasing, where consistent with applicable law and land use plans; and

(C) areas onshore in the United States on State or private land, subject to applicable law; and

(2) with the approval of the appropriate Federal or State land management agency or private land owner.

(d) Research at National Energy Technology Laboratory.—The Secretary, through the National Energy Technology Laboratory, shall carry out research complementary to research under subsection (b).

(e) Consultation with Secretary of the Interior.—In carrying out this part, the Secretary shall consult regularly with the Secretary of the Interior.

SEC. 242. Ultra-deepwater and extended reach drilling and carbon sequestration and unconventional technologies program.

(a) In general.—The Secretary shall carry out the activities under section 241(b), to—

(1) maximize the value of the ultra-deepwater natural gas and other petroleum resources of the United States by increasing the supply of such resources and by reducing the cost and increasing the efficiency of exploration for and production of such resources, while improving safety and minimizing environmental impacts;

(2) maximize the value of existing natural gas and petroleum production on existing lease sites by utilizing long range extended reach drilling technology;

(3) maximize the value of the onshore unconventional natural gas resources of the United States by increasing supply of such resources and improving efficiencies; and

(4) develop commercial carbon sequestration and carbon recapture methods with the goal of—

(A) sequestering 20 percent of the total quantity of direct greenhouse gas emissions from stationary sources in the United States per year, expressed in units of carbon dioxide equivalence, by 2010;

(B) sequestering 40 percent of the total quantity of direct greenhouse gas emissions from stationary sources in the United States per year, expressed in units of carbon dioxide equivalence, by 2015; and

(C) sequestering 60 percent of the total quantity of direct greenhouse gas emissions from stationary sources in the United States per year, expressed in units of carbon dioxide equivalence, by 2020.

(b) Role of the Secretary.—The Secretary shall have ultimate responsibility for, and oversight of, all aspects of the program under this section.

(c) Role of the program consortium.—

(1) IN GENERAL.—The Secretary shall contract with a consortium to—

(A) manage awards pursuant to subsection (f)(4);

(B) make recommendations to the Secretary for project solicitations;

(C) disburse funds awarded under subsection (f) as directed by the Secretary in accordance with the annual plan under subsection (e); and

(D) carry out other activities assigned to the program consortium by this section.

(2) LIMITATION.—The Secretary may not assign any activities to the program consortium except as specifically authorized under this section.

(3) CONFLICT OF INTEREST.—

(A) The Secretary shall establish procedures—

(i) to ensure that each board member, officer, or employee of the program consortium who is in a decisionmaking capacity under subsection (f)(3) or (4) shall disclose to the Secretary any financial interests in, or financial relationships with, applicants for or recipients of awards under this section, including those of his or her spouse or minor child, unless such relationships or interests would be considered to be remote or inconsequential; and

(ii) to require any board member, officer, or employee with a financial relationship or interest disclosed under clause (i) to recuse himself or herself from any review under subsection (f)(3) or oversight under subsection (f)(4) with respect to such applicant or recipient.

(B) The Secretary may disqualify an application or revoke an award under this section if a board member, officer, or employee has failed to comply with procedures required under subparagraph (A)(ii).

(d) Selection of the program consortium.—

(1) IN GENERAL.—The Secretary shall select the program consortium through an open, competitive process.

(2) MEMBERS.—The program consortium may include corporations, institutions of higher education, National Laboratories, or other research institutions. After submitting a proposal under paragraph (4), the program consortium may not add members without the consent of the Secretary.

(3) TAX STATUS.—The program consortium shall be an entity that is exempt from tax under section 501(c)(3) of the Internal Revenue Code of 1986.

(4) SCHEDULE.—Not later than 90 days after the date of enactment of this Act, the Secretary shall solicit proposals for the creation of the program consortium, which must be submitted not less than 180 days after the date of enactment of this Act. The Secretary shall select the program consortium not later than 240 days after such date of enactment.

(5) APPLICATION.—Applicants shall submit a proposal including such information as the Secretary may require. At a minimum, each proposal shall—

(A) list all members of the consortium;

(B) fully describe the structure of the consortium, including any provisions relating to intellectual property; and

(C) describe how the applicant would carry out the activities of the program consortium under this section.

(6) ELIGIBILITY.—To be eligible to be selected as the program consortium, an applicant must be an entity whose members collectively have demonstrated capabilities in planning and managing research, development, demonstration, and commercial application programs in natural gas or other petroleum exploration or production.

(7) CRITERION.—The Secretary may consider the amount of the fee an applicant proposes to receive under subsection (g) in selecting a consortium under this section.

(e) Annual plan.—

(1) IN GENERAL.—The program under this section shall be carried out pursuant to an annual plan prepared by the Secretary in accordance with paragraph (2).

(2) DEVELOPMENT.—(A) Before drafting an annual plan under this subsection, the Secretary shall solicit specific written recommendations from the program consortium for each element to be addressed in the plan, including those described in paragraph (4). The Secretary may request that the program consortium submit its recommendations in the form of a draft annual plan.

(B) The Secretary shall consult regularly with the program consortium throughout the preparation of the annual plan. The Secretary may also solicit comments from any other experts.

(3) PUBLICATION.—The Secretary shall transmit to the Congress and publish in the Federal Register the annual plan, along with any written comments received under paragraph (2). The annual plan shall be transmitted and published not later than 60 days after the date of enactment of an Act making appropriations for a fiscal year for the program under this section.

(4) CONTENTS.—The annual plan shall describe the ongoing and prospective activities of the program under this section and shall include—

(A) a list of any solicitations for awards that the Secretary plans to issue to carry out research, development, demonstration, or commercial application activities, including the topics for such work, who would be eligible to apply, selection criteria, and the duration of awards; and

(B) a description of the activities expected of the program consortium to carry out subsection (f)(4).

(f) Awards.—

(1) IN GENERAL.—The Secretary shall make awards to carry out research, development, demonstration, and commercial application activities under the program under this section. The program consortium shall not be eligible to receive such awards, but members of the program consortium may receive such awards.

(2) PROPOSALS.—The Secretary shall solicit proposals for awards under this subsection in such manner and at such time as the Secretary may prescribe, in consultation with the program consortium.

(3) REVIEW.—The Secretary shall make awards under this subsection through a competitive process, which shall include a review by individuals selected by the Secretary. Such individuals shall include, for each application, Federal officials, the program consortium, and non-Federal experts who are not board members, officers, or employees of the program consortium or of a member of the program consortium.

(4) OVERSIGHT.—(A) The program consortium shall oversee the implementation of awards under this subsection, consistent with the annual plan under subsection (e), including disbursing funds and monitoring activities carried out under such awards for compliance with the terms and conditions of the awards.

(B) Nothing in subparagraph (A) shall limit the authority or responsibility of the Secretary to oversee awards, or limit the authority of the Secretary to review or revoke awards.

(C) The Secretary shall provide to the program consortium the information necessary for the program consortium to carry out its responsibilities under this paragraph.

(g) Fee.—

(1) IN GENERAL.—To compensate the program consortium for carrying out its activities under this section, the Secretary shall provide to the program consortium a fee in an amount not to exceed 7.5 percent of the amounts awarded under subsection (f) for each fiscal year.

(2) ADVANCE.—The Secretary shall advance funds to the program consortium upon selection of the consortium, which shall be deducted from amounts to be provided under paragraph (1).

(h) Audit.—The Secretary shall retain an independent, commercial auditor to determine the extent to which funds provided to the program consortium, and funds provided under awards made under subsection (f), have been expended in a manner consistent with the purposes and requirements of this part. The auditor shall transmit a report annually to the Secretary, who shall transmit the report to Congress, along with a plan to remedy any deficiencies cited in the report.

SEC. 243. Sunset.

The authority provided by this part shall terminate on September 30, 2010.

SEC. 244. Definitions.

In this part:

(1) CARBON SEQUESTRATION.—The term “carbon sequestration” means the capture and secure storage of carbon dioxide emitted from the combustion of fossil fuels or other organic matter.

(2) EXTENDED REACH DRILLING.—The term “extended reach drilling” means technology designed to achieve a range up to 50,000 feet, so that more energy resources can be realized with fewer drilling facilities.

(3) PROGRAM CONSORTIUM.—The term “program consortium” means the consortium selected under section 242(d).

(4) REMOTE OR INCONSEQUENTIAL.—The term “remote or inconsequential” has the meaning given that term in regulations issued by the Office of Government Ethics under section 208(b)(2) of title 18, United States Code.

(5) ULTRA-DEEPWATER.—The term “ultra-deepwater” means a water depth that is equal to or greater than 1,500 meters.

(6) ULTRA-DEEPWATER ARCHITECTURE.—The term “ultra-deepwater architecture” means the integration of technologies for the exploration for, or production of, natural gas or other petroleum resources located at ultra-deepwater depths.

(7) ULTRA-DEEPWATER TECHNOLOGY.—The term “ultra-deepwater technology” means a discrete technology that is specially suited to address one or more challenges associated with the exploration for, or production of, natural gas or other petroleum resources located at ultra-deepwater depths.

(8) UNCONVENTIONAL NATURAL GAS AND OTHER PETROLEUM RESOURCE.—The term “unconventional natural gas and other petroleum resource” means natural gas and other petroleum resource located onshore in an economically inaccessible geological formation.

SEC. 301. References.

Except as otherwise expressly provided, whenever in this title an amendment or repeal is expressed in terms of an amendment to, or repeal of, a section or other provision, the reference shall be considered to be made to a section or other provision of the Internal Revenue Code of 1986.

SEC. 302. Administration of title.

(a) In general.—Notwithstanding any other provision of law, the Secretary of the Treasury shall allocate the tax incentives provided in subtitles A and B among taxpayers in accordance with regulations promulgated by the Secretary.

(b) Limitation on total allocated.—The total amount of incentives allocated under subsection (a) shall not exceed—

(1) $14,000,000,000 in the case of the tax incentives provided in subtitle A for the 10-year period beginning with taxable years beginning after the date of the enactment of this Act, and

(2) $22,000,000,000 in the case of the tax incentives provided in subtitle B for the 10-year period beginning with taxable years beginning after the date of the enactment of this Act.

SEC. 311. Extension through 2015 for placing qualified facilities in service for producing renewable electric energy.

(a) In general.—Subsection (d) of section 45 is amended by striking “January 1, 2006” each place it appears and inserting “January 1, 2015”.

(b) Effective date.—The amendments made by this section shall apply to property originally placed in service on or after January 1, 2006.

SEC. 312. Expansion and modification of renewable resource credit.

(a) Additional qualified energy resources.—

(1) IN GENERAL.—Section 45(c)(1) is amended by striking “and” at the end of subparagraph (F), by striking the period at the end of subparagraph (G), and by adding at the end the following new subparagraphs:

“(H) incremental hydropower,

“(I) incremental geothermal, and

“(J) ocean (tidal, wave, current, or thermal).”.

(2) DEFINITION OF RESOURCES.—Section 45(c) is amended by adding at the end the following new paragraphs:

“(8) INCREMENTAL HYDROPOWER.—The term ‘incremental hydropower’ means additional generating capacity achieved at a qualified facility before January 1, 2015, from increased efficiency .

“(9) INCREMENTAL GEOTHERMAL.—The term ‘incremental geothermal’ means additional generating capacity achieved at a qualified facility before January 1, 2015, from—

“(A) increased efficiency, or

“(B) additions of new capacity.”.

(3) DEFINITION OF FACILITIES.—Section 45(d) is amended by adding at the end the following new paragraphs:

“(9) INCREMENTAL HYDOPOWER FACILITIES.—In the case of a facility producing electricity from incremental hydropower, the term ‘qualified facility’ means any facility which is—

“(A) owned by the taxpayer,

“(B) originally placed in service before the date of the enactment of this paragraph, and

“(C) licensed by the Federal Energy Regulatory Commission.

“(10) INCREMENTAL GEOTHERMAL FACILITIES.—In the case of a facility producing electricity from incremental geothermal, the term ‘qualified facility’ means any facility owned by the taxpayer which is originally placed in service before the date of the enactment of this paragraph.

“(11) OCEAN FACILITIES.—In the case of a facility producing electricity from the ocean, the term ‘qualified facility’ means any facility owned by the taxpayer which is originally placed in service after the date of the enactment of this paragraph and before January 1, 2015.”.

(b) Modifications regarding open-loop biomass.—

(1) Subclause (I) of section 45(c)(3)(A)(ii) is amended by adding at the end “but not including old-growth timber or black liquor,”.

(2) Subclause (II) of section 45(c)(3)(A)(ii) is amended by striking “municipal solid waste, gas derived from the biodegradation of solid waste, or paper which is commonly recycled” and inserting “unsegregated municipal solid waste (garbage) or postconsumer wastepaper which can be recycled affordably”.

(c) Qualified facilities with co-production.—Section 45(b) is amended by striking paragraph (4) and inserting the following new paragraph:

“(4) INCREASED CREDIT FOR CO-PRODUCTION FACILITIES.—

“(A) IN GENERAL.—In the case of a qualified facility described in paragraph (2) or (3) of subsection (c) which adds a co-production facility after the date of the enactment of this paragraph, the amount in effect under subsection (a)(1) for an eligible taxable year of the taxpayer shall (after adjustment under paragraphs (1), (2), and (3)) be increased by .25 cents.

“(B) CO-PRODUCTION FACILITY.—For purposes of subparagraph (A), the term ‘co-production facility’ means a facility which—

“(i) enables a qualified facility to produce heat, mechanical power, or minerals from qualified energy resources in addition to electricity, and

“(ii) produces such energy on a continuous basis.

“(C) ELIGIBLE TAXABLE YEAR.—For purposes of subparagraph (A), the term ‘eligible taxable year’ means any taxable year in which the amount of gross receipts attributable to the co-production facility of a qualified facility are at least 10 percent of the amount of gross receipts attributable to electricity produced by such facility.”.

(d) Qualified facilities located within qualified indian lands.—Section 45(b) is amended by adding at the end the following new paragraph:

“(5) INCREASED CREDIT FOR QUALIFIED FACILITY LOCATED WITHIN QUALIFIED INDIAN LAND.—In the case of a qualified facility described in subsection (d)(2)(A) which—

“(A) is located within—

“(i) qualified Indian lands (as defined in section 7871(c)(3)), or

“(ii) lands which are held in trust by a Native Corporation (as defined in section 3(m) of the Alaska Native Claims Settlement Act (43 U.S.C. 1602(m))) for Alaska Natives, and

“(B) is operated with the explicit written approval of the Indian tribal government or Native Corporation (as so defined) having jurisdiction over such lands, the amount in effect under subsection (a)(1) for a taxable year shall (after adjustment under paragraphs (1), (2), (3), and (4)) be increased by .25 cents.”.

(e) Treatment of qualified facilities not in compliance with pollution laws.—Section 45(c) is further amended by adding at the end the following new paragraph:

“(10) NONCOMPLIANCE WITH POLLUTION LAWS.—A facility which is not in compliance with the applicable State and Federal pollution prevention, control, and permit requirements for any period of time shall not be treated as a qualified facility during such period.”.

(f) Coordination with other credits.—Section 45(e) is amended by adding at the end the following new paragraph:

“(10) COORDINATION WITH OTHER CREDITS.—This section shall not apply to any qualified facility with respect to which a credit under any other section is allowed for the taxable year unless the taxpayer elects to waive application of such credit to such facility.”.

(g) Effective date.—The amendments made by this section shall apply to electricity and other energy produced in taxable years beginning after the date of the enactment of this Act.

SEC. 313. Tradable renewable resource credit for public utilities and other tax exempt organizations.

(a) Credits for certain tax-exempt organizations and governmental units.—

(1) IN GENERAL.—Section 45(d) (relating to definitions and special rules), as amended by section 312, is amended by adding at the end the following:

“(10) CREDITS FOR CERTAIN TAX-EXEMPT ORGANIZATIONS AND GOVERNMENTAL UNITS.—

“(A) ALLOWANCE OF CREDIT.—Any credit which would be allowable under subsection (a) with respect to a qualified facility of an entity if such entity were not exempt from tax under this chapter shall be treated as a credit allowable under subpart D to such entity if such entity 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) an entity the income of which is excludable from gross income under section 115, or

“(iv) a State, the District of Columbia, any territory or possession of the United States, or any political subdivision thereof.

“(B) USE OF CREDIT.—

“(i) TRANSFER OF CREDIT.—An entity described in subparagraph (A) may assign, trade, sell, or otherwise transfer any credit allowable to such entity under subparagraph (A) to any taxpayer.

“(ii) USE OF CREDIT AS AN OFFSET.—Notwithstanding any other provision of law, in the case of an entity described in clause (i) or (ii) of subparagraph (A), any credit allowable to such entity under subparagraph (A) may be applied by such entity, without penalty, 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.).

“(C) CREDIT NOT INCOME.—Neither a transfer under clause (i) nor a use under clause (ii) of subparagraph (B) of any credit allowable under subparagraph (A) shall result in income for purposes of section 501(c)(12).

“(D) TRANSFER PROCEEDS TREATED AS ARISING FROM ESSENTIAL GOVERNMENT FUNCTION.—Any proceeds derived by an entity described in subparagraph (A)(iii) from the transfer of any credit under subparagraph (B)(i) shall be treated as arising from an essential government function.

“(E) CREDITS NOT REDUCED BY TAX-EXEMPT BONDS OR CERTAIN OTHER SUBSIDIES.—Subsection (b)(3) shall not apply to reduce any credit allowable under subparagraph (A) with respect to—

“(i) proceeds described in subparagraph (A)(ii) of such subsection, or

“(ii) any loan, debt, or other obligation incurred under subchapter I of chapter 31 of title 7 of the Rural Electrification Act of 1936 (7 U.S.C. 901 et seq.), used to provide financing for any qualified facility.

“(F) TREATMENT OF UNRELATED PERSONS.—For purposes of this paragraph, sales among and between entities described in subparagraph (A) shall be treated as sales between unrelated parties.”.

(2) INCLUSION OF INDIAN TRIBAL GOVERNMENTS.—Section 7871(a)(7) is amended by striking “and” at the end of subparagraph (A), by striking the period at the end of subparagraph (B), and by adding at the end the following:

“(C) section 45 (relating to credit for electricity produced from certain renewable resources).”.

(b) Effective date.—The amendments made by this section shall apply to electricity and other energy produced in taxable years beginning after the date of the enactment of this Act.

SEC. 314. Alternative motor vehicle credit.

(a) In general.—Subpart B of part IV of subchapter A of chapter 1 (relating to foreign tax credit, etc.) is amended by adding at the end the following new section:

“SEC. 30B. Alternative motor vehicle credit.

“(a) Allowance of credit.—There shall be allowed as a credit against the tax imposed by this chapter for the taxable year an amount equal to the sum of—

“(1) the new qualified fuel cell motor vehicle credit determined under subsection (b),

“(2) the new qualified hybrid motor vehicle credit determined under subsection (c),

“(3) the new qualified alternative fuel motor vehicle credit determined under subsection (d), and

“(4) the new qualified advanced diesel motor vehicle credit determined under subsection (e).

“(b) New Qualified fuel cell motor vehicle credit.—

“(1) IN GENERAL.—For purposes of subsection (a), the new qualified fuel cell motor vehicle credit determined under this subsection with respect to a new qualified fuel cell motor vehicle placed in service by the taxpayer during the taxable year is—

“(A) $8,000 ($4,000 in the case of vehicles placed in service after December 31, 2008), if such vehicle has a gross vehicle weight rating of not more than 8,500 pounds,

“(B) $10,000, if such vehicle has a gross vehicle weight rating of more than 8,500 pounds but not more than 14,000 pounds,

“(C) $20,000, if such vehicle has a gross vehicle weight rating of more than 14,000 pounds but not more than 26,000 pounds, and

“(D) $40,000, if such vehicle has a gross vehicle weight rating of more than 26,000 pounds.

“(2) INCREASE FOR FUEL EFFICIENCY.—

“(A) IN GENERAL.—The amount determined under paragraph (1)(A) with respect to a new qualified fuel cell motor vehicle which is a passenger automobile or light truck shall be increased by—

“(i) $1,000, if such vehicle achieves at least 150 percent but less than 175 percent of the 2002 model year city fuel economy,

“(ii) $1,500, if such vehicle achieves at least 175 percent but less than 200 percent of the 2002 model year city fuel economy,

“(iii) $2,000, if such vehicle achieves at least 200 percent but less than 225 percent of the 2002 model year city fuel economy,

“(iv) $2,500, if such vehicle achieves at least 225 percent but less than 250 percent of the 2002 model year city fuel economy,

“(v) $3,000, if such vehicle achieves at least 250 percent but less than 275 percent of the 2002 model year city fuel economy,

“(vi) $3,500, if such vehicle achieves at least 275 percent but less than 300 percent of the 2002 model year city fuel economy, and

“(vii) $4,000, if such vehicle achieves at least 300 percent of the 2002 model year city fuel economy.

“(B) 2002 MODEL YEAR CITY FUEL ECONOMY.—For purposes of subparagraph (A), the 2002 model year city fuel economy with respect to a vehicle shall be determined in accordance with the following tables:

“(i) In the case of a passenger automobile:

The 2002 model year city
““If vehicle inertia weight class is: fuel economy is:
1,500 or 1,750 lbs 45.2 mpg 
2,000 lbs 39.6 mpg 
2,250 lbs 35.2 mpg 
2,500 lbs 31.7 mpg 
2,750 lbs 28.8 mpg 
3,000 lbs 26.4 mpg 
3,500 lbs 22.6 mpg 
4,000 lbs 19.8 mpg 
4,500 lbs 17.6 mpg 
5,000 lbs 15.9 mpg 
5,500 lbs 14.4 mpg 
6,000 lbs 13.2 mpg 
6,500 lbs 12.2 mpg 
7,000 to 8,500 lbs 11.3 mpg.

“(ii) In the case of a light truck:

The 2002 model year city
““If vehicle inertia weight class is: fuel economy is:
1,500 or 1,750 lbs 39.4 mpg 
2,000 lbs 35.2 mpg 
2,250 lbs 31.8 mpg 
2,500 lbs 29.0 mpg 
2,750 lbs 26.8 mpg 
3,000 lbs 24.9 mpg 
3,500 lbs 21.8 mpg 
4,000 lbs 19.4 mpg 
4,500 lbs 17.6 mpg 
5,000 lbs 16.1 mpg 
5,500 lbs 14.8 mpg 
6,000 lbs 13.7 mpg 
6,500 lbs 12.8 mpg 
7,000 to 8,500 lbs 12.1 mpg.

“(C) VEHICLE INERTIA WEIGHT CLASS.—For purposes of subparagraph (B), the term ‘vehicle inertia weight class’ has the same meaning as when defined in regulations prescribed by the Administrator of the Environmental Protection Agency for purposes of the administration of title II of the Clean Air Act (42 U.S.C. 7521 et seq.).

“(3) NEW QUALIFIED FUEL CELL MOTOR VEHICLE.—For purposes of this subsection, the term ‘new qualified fuel cell motor vehicle’ means a motor vehicle—

“(A) which is propelled by power derived from one or more cells which convert chemical energy directly into electricity by combining oxygen with hydrogen fuel which is stored on board the vehicle in any form and may or may not require reformation prior to use,

“(B) which, in the case of a passenger automobile or light truck—

“(i) for 2002 and later model vehicles, has received a certificate of conformity under the Clean Air Act and meets or exceeds the equivalent qualifying California low emission vehicle standard under section 243(e)(2) of the Clean Air Act for that make and model year, and

“(ii) for 2004 and later model vehicles, has received a certificate that such vehicle meets or exceeds the Bin 5 Tier II emission level established in regulations prescribed by the Administrator of the Environmental Protection Agency under section 202(i) of the Clean Air Act for that make and model year vehicle,

“(C) the original use of which commences with the taxpayer,

“(D) which is acquired for use or lease by the taxpayer and not for resale, and

“(E) which is made by a manufacturer.

“(c) New Qualified hybrid motor vehicle credit.—

“(1) IN GENERAL.—For purposes of subsection (a), the new qualified hybrid motor vehicle credit determined under this subsection with respect to a new qualified hybrid motor vehicle placed in service by the taxpayer during the taxable year is the credit amount determined under paragraph (2).

“(2) CREDIT AMOUNT.—

“(A) IN GENERAL.—The credit amount determined under this paragraph shall be determined in accordance with the following tables:

“(i) In the case of a new qualified hybrid motor vehicle which is a passenger automobile, medium duty passenger vehicle, or light truck and which provides the following percentage of the maximum available power:

““If percentage of the maximum
 available power is: The credit amount is:
At least 5 percent but less than 10 percent $250 
At least 10 percent but less than 20 percent $500 
At least 20 percent but less than 30 percent $750 
At least 30 percent $1,000.

“(ii) In the case of a new qualified hybrid motor vehicle which is a heavy duty hybrid motor vehicle and which provides the following percentage of the maximum available power:

“(I) If such vehicle has a gross vehicle weight rating of not more than 14,000 pounds:

““If percentage of the maximum
 available power is: The credit amount is:
At least 20 percent but less than 30 percent $1,000 
At least 30 percent but less than 40 percent $1,750 
At least 40 percent but less than 50 percent $2,000 
At least 50 percent but less than 60 percent $2,250 
At least 60 percent $2,500.

“(II) If such vehicle has a gross vehicle weight rating of more than 14,000 but not more than 26,000 pounds:

““If percentage of the maximum
 available power is: The credit amount is:
At least 20 percent but less than 30 percent $4,000 
At least 30 percent but less than 40 percent $4,500 
At least 40 percent but less than 50 percent $5,000 
At least 50 percent but less than 60 percent $5,500 
At least 60 percent $6,000.

“(III) If such vehicle has a gross vehicle weight rating of more than 26,000 pounds:

““If percentage of the maximum
 available power is: The credit amount is:
At least 20 percent but less than 30 percent $6,000 
At least 30 percent but less than 40 percent $7,000 
At least 40 percent but less than 50 percent $8,000 
At least 50 percent but less than 60 percent $9,000 
At least 60 percent $10,000.

“(B) INCREASE FOR FUEL EFFICIENCY.—

“(i) AMOUNT.—The amount determined under subparagraph (A)(i) with respect to a new qualified hybrid motor vehicle which is a passenger automobile or light truck shall be increased by—

“(I) $500, if such vehicle achieves at least 125 percent but less than 150 percent of the 2002 model year city fuel economy,

“(II) $1,000, if such vehicle achieves at least 150 percent but less than 175 percent of the 2002 model year city fuel economy,

“(III) $1,500, if such vehicle achieves at least 175 percent but less than 200 percent of the 2002 model year city fuel economy,

“(IV) $2,000, if such vehicle achieves at least 200 percent but less than 225 percent of the 2002 model year city fuel economy,

“(V) $2,500, if such vehicle achieves at least 225 percent but less than 250 percent of the 2002 model year city fuel economy, and

“(VI) $3,000, if such vehicle achieves at least 250 percent of the 2002 model year city fuel economy.

“(ii) 2002 MODEL YEAR CITY FUEL ECONOMY.—For purposes of clause (i), the 2002 model year city fuel economy with respect to a vehicle shall be determined on a gasoline gallon equivalent basis as determined by the Administrator of the Environmental Protection Agency using the tables provided in subsection (b)(2)(B) with respect to such vehicle.

“(C) INCREASE FOR ACCELERATED EMISSIONS PERFORMANCE.—The amount determined under subparagraph (A)(ii) with respect to an applicable heavy duty hybrid motor vehicle shall be increased by the increased credit amount determined in accordance with the following tables:

“(i) In the case of a vehicle which has a gross vehicle weight rating of not more than 14,000 pounds:

““If the model year is: The increased credit amount is:
2005 $3,000 
2006 $2,500 
2007 $2,000 
2008 $1,500.

“(ii) In the case of a vehicle which has a gross vehicle weight rating of more than 14,000 pounds but not more than 26,000 pounds:

““If the model year is: The increased credit amount is:
2005 $7,750 
2006 $6,500 
2007 $5,250 
2008 $4,000.

“(iii) In the case of a vehicle which has a gross vehicle weight rating of more than 26,000 pounds:

““If the model year is: The increased credit amount is:
2005 $12,000 
2006 $10,000 
2007 $8,000 
2008 $6,000.

“(D) DEFINITIONS RELATING TO CREDIT AMOUNT.—

“(i) APPLICABLE HEAVY DUTY HYBRID MOTOR VEHICLE.—For purposes of subparagraph (C), the term ‘applicable heavy duty hybrid motor vehicle’ means a heavy duty hybrid motor vehicle which is powered by an internal combustion or heat engine which is certified as meeting the emission standards set in the regulations prescribed by the Administrator of the Environmental Protection Agency for 2007 and later model year diesel heavy duty engines, or for 2008 and later model year ottocycle heavy duty engines, as applicable.

“(ii) MAXIMUM AVAILABLE POWER.—

“(I) PASSENGER AUTOMOBILE, MEDIUM DUTY PASSENGER VEHICLE, OR LIGHT TRUCK.—For purposes of subparagraph (A)(i), the term ‘maximum available power’ means the maximum power available from the rechargeable energy storage system, during a standard 10 second pulse power or equivalent test, divided by such maximum power and the SAE net power of the heat engine.

“(II) HEAVY DUTY HYBRID MOTOR VEHICLE.—For purposes of subparagraph (A)(ii), the term ‘maximum available power’ means the maximum power available from the rechargeable energy storage system, during a standard 10 second pulse power or equivalent test, divided by the vehicle’s total traction power. The term ‘total traction power’ means the sum of the peak power from the rechargeable energy storage system and the heat engine peak power of the vehicle, except that if such storage system is the sole means by which the vehicle can be driven, the total traction power is the peak power of such storage system.

“(3) NEW QUALIFIED HYBRID MOTOR VEHICLE.—For purposes of this subsection, the term ‘new qualified hybrid motor vehicle’ means a motor vehicle—

“(A) which draws propulsion energy from onboard sources of stored energy which are both—

“(i) an internal combustion or heat engine using combustible fuel, and

“(ii) a rechargeable energy storage system,

“(B) which, in the case of a passenger automobile, medium duty passenger vehicle, or light truck—

“(i) for 2002 and later model vehicles, has received a certificate of conformity under the Clean Air Act and meets or exceeds the equivalent qualifying California low emission vehicle standard under section 243(e)(2) of the Clean Air Act for that make and model year, and

“(ii) for 2004 and later model vehicles, has received a certificate that such vehicle meets or exceeds the Bin 5 Tier II emission level established in regulations prescribed by the Administrator of the Environmental Protection Agency under section 202(i) of the Clean Air Act for that make and model year vehicle,

“(C) which, in the case of a heavy duty hybrid motor vehicle, the internal combustion or heat engine of which has received a certificate of conformity under the Clean Air Act as meeting the emission standards set in the regulations prescribed by the Administrator of the Environmental Protection Agency for 2004 through 2007 model year diesel heavy duty engines or ottocycle heavy duty engines, as applicable,

“(D) the original use of which commences with the taxpayer,

“(E) which is acquired for use or lease by the taxpayer and not for resale, and

“(F) which is made by a manufacturer.

“(4) HEAVY DUTY HYBRID MOTOR VEHICLE.—For purposes of this subsection, the term ‘heavy duty hybrid motor vehicle’ means a new qualified hybrid motor vehicle which has a gross vehicle weight rating of more than 8,500 pounds. Such term does not include a medium duty passenger vehicle.

“(d) New Qualified alternative fuel motor vehicle credit.—

“(1) ALLOWANCE OF CREDIT.—Except as provided in paragraph (5), the new qualified alternative fuel motor vehicle credit determined under this subsection is an amount equal to the applicable percentage of the incremental cost of any new qualified alternative fuel motor vehicle placed in service by the taxpayer during the taxable year.

“(2) APPLICABLE PERCENTAGE.—For purposes of paragraph (1), the applicable percentage with respect to any new qualified alternative fuel motor vehicle is—

“(A) 50 percent, plus

“(B) 30 percent, if such vehicle—

“(i) has received a certificate of conformity under the Clean Air Act and meets or exceeds the most stringent standard available for certification under the Clean Air Act for that make and model year vehicle (other than a zero emission standard), or

“(ii) has received an order certifying the vehicle as meeting the same requirements as vehicles which may be sold or leased in California and meets or exceeds the most stringent standard available for certification under the State laws of California (enacted in accordance with a waiver granted under section 209(b) of the Clean Air Act) for that make and model year vehicle (other than a zero emission standard).

For purposes of the preceding sentence, in the case of any new qualified alternative fuel motor vehicle which weighs more than 14,000 pounds gross vehicle weight rating, the most stringent standard available shall be such standard available for certification in 2002.

“(3) INCREMENTAL COST.—For purposes of this subsection, the incremental cost of any new qualified alternative fuel motor vehicle is equal to the amount of the excess of the manufacturer’s suggested retail price for such vehicle over such price for a gasoline or diesel fuel motor vehicle of the same model, to the extent such amount does not exceed—

“(A) $5,000, if such vehicle has a gross vehicle weight rating of not more than 8,500 pounds,

“(B) $10,000, if such vehicle has a gross vehicle weight rating of more than 8,500 pounds but not more than 14,000 pounds,

“(C) $25,000, if such vehicle has a gross vehicle weight rating of more than 14,000 pounds but not more than 26,000 pounds, and

“(D) $40,000, if such vehicle has a gross vehicle weight rating of more than 26,000 pounds.

“(4) NEW QUALIFIED ALTERNATIVE FUEL MOTOR VEHICLE.—For purposes of this subsection—

“(A) IN GENERAL.—The term ‘new qualified alternative fuel motor vehicle’ means any motor vehicle—

“(i) which is only capable of operating on an alternative fuel,

“(ii) the original use of which commences with the taxpayer,

“(iii) which is acquired by the taxpayer for use or lease, but not for resale, and

“(iv) which is made by a manufacturer.

“(B) ALTERNATIVE FUEL.—The term ‘alternative fuel’ means compressed natural gas, liquefied natural gas, liquefied petroleum gas, hydrogen, and any liquid at least 85 percent of the volume of which consists of methanol or ethanol.

“(5) CREDIT FOR MIXED-FUEL VEHICLES.—

“(A) IN GENERAL.—In the case of a mixed-fuel vehicle placed in service by the taxpayer during the taxable year, the credit determined under this subsection is an amount equal to—

“(i) in the case of a 75/25 mixed-fuel vehicle, 70 percent of the credit which would have been allowed under this subsection if such vehicle was a qualified alternative fuel motor vehicle, and

“(ii) in the case of a 90/10 mixed-fuel vehicle, 90 percent of the credit which would have been allowed under this subsection if such vehicle was a qualified alternative fuel motor vehicle.

“(B) MIXED-FUEL VEHICLE.—For purposes of this subsection, the term ‘mixed-fuel vehicle’ means any motor vehicle described in subparagraph (C) or (D) of paragraph (3), which—

“(i) is certified by the manufacturer as being able to perform efficiently in normal operation on a combination of an alternative fuel and a petroleum-based fuel,

“(ii) either—

“(I) has received a certificate of conformity under the Clean Air Act, or

“(II) has received an order certifying the vehicle as meeting the same requirements as vehicles which may be sold or leased in California and meets or exceeds the low emission vehicle standard under section 88.105-94 of title 40, Code of Federal Regulations, for that make and model year vehicle,

“(iii) the original use of which commences with the taxpayer,

“(iv) which is acquired by the taxpayer for use or lease, but not for resale, and

“(v) which is made by a manufacturer.

“(C) 75/25 MIXED-FUEL VEHICLE.—For purposes of this subsection, the term ‘75/25 mixed-fuel vehicle’ means a mixed-fuel vehicle which operates using at least 75 percent alternative fuel and not more than 25 percent petroleum-based fuel.

“(D) 90/10 MIXED-FUEL VEHICLE.—For purposes of this subsection, the term ‘90/10 mixed-fuel vehicle’ means a mixed-fuel vehicle which operates using at least 90 percent alternative fuel and not more than 10 percent petroleum-based fuel.

“(e) New qualified advanced diesel motor vehicle credit.—

“(1) IN GENERAL.—For purposes of subsection (a), the new qualified advanced diesel motor vehicle credit determined under this subsection with respect to a new qualified advanced diesel motor vehicle placed in service by the taxpayer during the taxable year is—

“(A) $3,000 for vehicles with a gross vehicle weight rating of not more than 14,000 pounds, placed in service before December 31, 2009, if such vehicle has received a certificate that such vehicle meets or exceeds the Bin 5 Tier II emission level established in regulations prescribed by the Administrator of the Environmental Protection Agency under section 202(i) of the Clean Air Act for that make and model year,

“(B) $5,000 for vehicles with a gross vehicle weight rating of not more than 14,000 pounds, placed in service before December 31, 2013, if such vehicle has received a certificate that such vehicle meets or exceeds the Ultra Low Emission Vehicle II (ULEV II) emission level established in regulations prescribed by the California Air Resources Board under chapter 1 of division 3 of title 13, California Code of Regulations, for that make and model year, and

“(C) zero in any other case.

“(2) DEFINITIONS.—

“(A) VEHICLE INERTIA WEIGHT CLASS.—For purposes of this subsection, the term ‘vehicle inertia weight class’ has the same meaning as when defined in regulations prescribed by the Administrator of the Environmental Protection Agency for purposes of the administration of title II of the Clean Air Act (42 U.S.C. 7521 et seq.).

“(B) NEW QUALIFIED ADVANCED DIESEL MOTOR VEHICLE.—For purposes of this subsection, the term ‘new qualified advanced diesel motor vehicle’ means any motor vehicle—

“(i) with a direct-injection diesel engine which achieves at least 20% increased fuel efficiency over the comparably sized gasoline engine, as determined by the Secretary,

“(ii) the original use of which commences with the taxpayer,

“(iii) which is acquired for use or lease by the taxpayer and not for resale, and

“(iv) which is made by a manufacturer.

“(f) Application with other credits.—The credit allowed under subsection (a) for any taxable year shall not exceed the excess (if any) of—

“(1) the regular tax for the taxable year reduced by the sum of the credits allowable under subpart A and sections 27, 29, and 30, over

“(2) the tentative minimum tax for the taxable year.

“(g) Other definitions and special rules.—For purposes of this section—

“(1) CONSUMABLE FUEL.—The term ‘consumable fuel’ means any solid, liquid, or gaseous matter which releases energy when consumed by an auxiliary power unit.

“(2) MOTOR VEHICLE.—The term ‘motor vehicle’ has the meaning given such term by section 30(c)(2).

“(3) CITY FUEL ECONOMY.—The city fuel economy with respect to any vehicle shall be measured in a manner which is substantially similar to the manner city fuel economy is measured in accordance with procedures under part 600 of subchapter Q of chapter I of title 40, Code of Federal Regulations, as in effect on the date of the enactment of this section.

“(4) OTHER TERMS.—The terms ‘automobile’, ‘passenger automobile’, ‘medium duty passenger vehicle’, ‘light truck’, and ‘manufacturer’ have the meanings given such terms in regulations prescribed by the Administrator of the Environmental Protection Agency for purposes of the administration of title II of the Clean Air Act (42 U.S.C. 7521 et seq.).

“(5) REDUCTION IN BASIS.—For purposes of this subtitle, the basis of any property for which a credit is allowable under subsection (a) shall be reduced by the amount of such credit so allowed (determined without regard to subsection (e)).

“(6) NO DOUBLE BENEFIT.—The amount of any deduction or other credit allowable under this chapter—

“(A) for any incremental cost taken into account in computing the amount of the credit determined under subsection (d) shall be reduced by the amount of such credit attributable to such cost, and

“(B) with respect to a vehicle described under subsection (b) or (c), shall be reduced by the amount of credit allowed under subsection (a) for such vehicle for the taxable year.

“(7) PROPERTY USED BY TAX-EXEMPT ENTITIES.—In the case of a credit amount which is allowable with respect to a motor vehicle which is acquired by an entity exempt from tax under this chapter, the person which sells or leases such vehicle to the entity shall be treated as the taxpayer with respect to the vehicle for purposes of this section and the credit shall be allowed to such person, but only if the person clearly discloses to the entity at the time of any sale or lease the specific amount of any credit otherwise allowable to the entity under this section.

“(8) RECAPTURE.—The Secretary shall, by regulations, provide for recapturing the benefit of any credit allowable under subsection (a) with respect to any property which ceases to be property eligible for such credit (including recapture in the case of a lease period of less than the economic life of a vehicle).

“(9) PROPERTY USED OUTSIDE UNITED STATES, ETC., NOT QUALIFIED.—No credit shall be allowed under subsection (a) with respect to any property referred to in section 50(b) or with respect to the portion of the cost of any property taken into account under section 179.

“(10) ELECTION TO NOT TAKE CREDIT.—No credit shall be allowed under subsection (a) for any vehicle if the taxpayer elects to not have this section apply to such vehicle.

“(11) CARRYBACK AND CARRYFORWARD ALLOWED.—

“(A) IN GENERAL.—If the credit amount allowable under subsection (a) for a taxable year exceeds the amount of the limitation under subsection (e) for such taxable year (in this paragraph referred to as the ‘unused credit year’), such excess shall be allowed as a credit carryback for each of the 3 taxable years beginning after the date of the enactment of this section, which precede the unused credit year and a credit carryforward for each of the 20 taxable years which succeed the unused credit year.

“(B) RULES.—Rules similar to the rules of section 39 shall apply with respect to the credit carryback and credit carryforward under subparagraph (A).

“(12) INTERACTION WITH AIR QUALITY AND MOTOR VEHICLE SAFETY STANDARDS.—Unless otherwise provided in this section, a motor vehicle shall not be considered eligible for a credit under this section unless such vehicle is in compliance with—

“(A) the applicable provisions of the Clean Air Act for the applicable make and model year of the vehicle (or applicable air quality provisions of State law in the case of a State which has adopted such provision under a waiver under section 209(b) of the Clean Air Act), and

“(B) the motor vehicle safety provisions of sections 30101 through 30169 of title 49, United States Code.

“(h) Regulations.—

“(1) IN GENERAL.—Except as provided in paragraph (2), the Secretary shall promulgate such regulations as necessary to carry out the provisions of this section.

“(2) COORDINATION IN PRESCRIPTION OF CERTAIN REGULATIONS.—The Secretary of the Treasury, in coordination with the Secretary of Transportation and the Administrator of the Environmental Protection Agency, shall prescribe such regulations as necessary to determine whether a motor vehicle meets the requirements to be eligible for a credit under this section.

“(i) Termination.—This section shall not apply to any property purchased after—

“(1) in the case of a new qualified fuel cell motor vehicle (as described in subsection (b)), December 31, 2013,

“(2) in the case of a new qualified advanced diesel motor vehicle to which subsection (e)(1)(B) applies, December 31, 2013, and

“(3) in the case of any other property, December 31, 2009.”.

(b) Conforming amendments.—

(1) Section 1016(a) is amended by striking “and” at the end of paragraph (30), by striking the period at the end of paragraph (31) and inserting “, and”, and by adding at the end the following new paragraph:

“(32) to the extent provided in section 30B(g)(5).”.

(2) Section 55(c)(3) is amended by inserting “30B(f),” after “30(b)(3)”.

(3) Section 6501(m) is amended by inserting “30B(g)(10),” after “30(d)(4),”.

(4) The table of sections for subpart B of part IV of subchapter A of chapter 1 is amended by inserting after the item relating to section 30A the following new item:


“Sec. 30B. Alternative motor vehicle credit”.


(c) 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. 315. Modification of credit for qualified electric vehicles.

(a) Amount of credit.—

(1) IN GENERAL.—Section 30(a) (relating to allowance of credit) is amended by striking “10 percent of”.

(2) LIMITATION OF CREDIT ACCORDING TO TYPE OF VEHICLE.—Section 30(b) (relating to limitations) is amended—

(A) by striking paragraphs (1) and (2) and inserting the following new paragraph:

“(1) LIMITATION ACCORDING TO TYPE OF VEHICLE.—The amount of the credit allowed under subsection (a) for any vehicle shall not exceed the greatest of the following amounts applicable to such vehicle:

“(A) In the case of a vehicle which conforms to the Motor Vehicle Safety Standard 500 prescribed by the Secretary of Transportation, as in effect on the date of the enactment of the New Apollo Energy Act of 2005, the lesser of—

“(i) 10 percent of the manufacturer’s suggested retail price of the vehicle, or

“(ii) $1,500.

“(B) In the case of a vehicle not described in subparagraph (A) with a gross vehicle weight rating not exceeding 8,500 pounds—

“(i) $4,000, or

“(ii) $6,000, if such vehicle is—

“(I) capable of a driving range of at least 100 miles on a single charge of the vehicle’s rechargeable batteries as measured pursuant to the urban dynamometer schedules under appendix I to part 86 of title 40, Code of Federal Regulations, or

“(II) capable of a payload capacity of at least 1,000 pounds.

“(C) In the case of a vehicle with a gross vehicle weight rating exceeding 8,500 but not exceeding 14,000 pounds, $10,000.

“(D) In the case of a vehicle with a gross vehicle weight rating exceeding 14,000 but not exceeding 26,000 pounds, $20,000.

“(E) In the case of a vehicle with a gross vehicle weight rating exceeding 26,000 pounds, $40,000.”, and

(B) by redesignating paragraph (3) as paragraph (2).

(3) CONFORMING AMENDMENTS.—

(A) Section 53(d)(1)(B)(iii) is amended by striking “section 30(b)(3)(B)” and inserting “section 30(b)(2)(B)”.

(B) Section 55(c)(3) is amended by striking “30(b)(3)” and inserting “30(b)(2)”.

(b) Qualified battery electric vehicle.—

(1) IN GENERAL.—Section 30(c)(1)(A) (defining qualified electric vehicle) is amended to read as follows:

“(A) which is—

“(i) operated solely by use of a battery or battery pack, or

“(ii) powered primarily through the use of an electric battery or battery pack using a flywheel or capacitor which stores energy produced by an electric motor through regenerative braking to assist in vehicle operation,”.

(2) LEASED VEHICLES.—Section 30(c)(1)(C) is amended by inserting “or lease” after “use”.

(3) CONFORMING AMENDMENTS.—

(A) Subsections (a), (b)(2), and (c) of section 30 are each amended by inserting “battery” after “qualified” each place it appears.

(B) The heading of subsection (c) of section 30 is amended by inserting “Battery” after “Qualified”.

(C) The heading of section 30 is amended by inserting “battery” after “qualified”.

(D) The item relating to section 30 in the table of sections for subpart B of part IV of subchapter A of chapter 1 is amended by inserting “battery” after “qualified”.

(E) Section 179A(c)(3) is amended by inserting “battery” before “electric”.

(F) The heading of paragraph (3) of section 179A(c) is amended by inserting “battery” before “electric”.

(c) Additional special rules.—

(1) IN GENERAL.—Section 30(d) (relating to special rules) is amended by adding at the end the following new paragraphs:

“(5) NO DOUBLE BENEFIT.—The amount of any deduction or other credit allowable under this chapter for any cost taken into account in computing the amount of the credit determined under subsection (a) shall be reduced by the amount of such credit attributable to such cost.

“(6) PROPERTY USED BY TAX-EXEMPT ENTITIES.—In the case of a credit amount which is allowable with respect to a vehicle which is acquired by an entity exempt from tax under this chapter, the person which sells or leases such vehicle to the entity shall be treated as the taxpayer with respect to the vehicle for purposes of this section and the credit shall be allowed to such person, but only if the person clearly discloses to the entity at the time of any sale or lease the specific amount of any credit otherwise allowable to the entity under this section.

“(7) CARRYBACK AND CARRYFORWARD ALLOWED.—

“(A) IN GENERAL.—If the credit amount allowable under subsection (a) for a taxable year exceeds the amount of the limitation under subsection (b)(2) for such taxable year (in this paragraph referred to as the ‘unused credit year’), such excess shall be allowed as a credit carryback for each of the 3 taxable years beginning after the date of the enactment of this paragraph, which precede the unused credit year and a credit carryforward for each of the 20 taxable years which succeed the unused credit year.

“(B) RULES.—Rules similar to the rules of section 39 shall apply with respect to the credit carryback and credit carryforward under subparagraph (A).”.

(2) CONFORMING AMENDMENT.—Section 179A(c) is amended by striking paragraph (3).

(d) Extension of credit.—Section 30(e) (relating to termination) is amended by striking “2006” and inserting “2009”.

(e) 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. 316. Extension of biodiesel tax credits.

(a) In general.—Sections 40A(e), 6426(c)(6), and 6427(e)(3)(B) are each amended by stirking “2006” and inserting “2014”.

(b) Effective date.—The amendments made by this section shall take effect on the date of the enactment of this Act.

SEC. 317. Credit for retail sale of alternative fuels as motor vehicle fuel.

(a) In general.—Subpart D of part IV of subchapter A of chapter 1 (relating to business related credits) is amended by inserting after section 40A the following new section:

“SEC. 40B. Credit for retail sale of alternative fuels as motor vehicle fuel.

“(a) General rule.—For purposes of section 38, the alternative fuel retail sales credit for any taxable year is the applicable amount for each gasoline gallon equivalent of alternative fuel sold at retail by the taxpayer during such year as a fuel to propel any qualified motor vehicle.

“(b) Definitions.—For purposes of this section—

“(1) APPLICABLE AMOUNT.—The term ‘applicable amount’ means as follows:

“(A) IN GENERAL.—Except as provided in subparagraph (B), the amount determined in accordance with the following table:

““In the case of any taxable year
 ending in— The applicable amount is—
2006 30 cents 
2007 40 cents 
2008 and 2009 50 cents 
2010 40 cents 
2011 30 cents.

“(B) HYDROGEN FUEL.—In the case of an alternative fuel which is hydrogen fuel, the amount determined in accordance with the following table:

““In the case of any taxable year
 ending in— The applicable amount is—
2006 30 cents 
2007 40 cents 
2008 through 2013 50 cents 
2014 40 cents 
2015 30 cents.

“(2) ALTERNATIVE FUEL.—The term ‘alternative fuel’ means compressed natural gas, liquefied natural gas, liquefied petroleum gas, hydrogen, and any liquid at least 85 percent of the volume of which consists of methanol or ethanol.

“(3) GASOLINE GALLON EQUIVALENT.—The term ‘gasoline gallon equivalent’ means, with respect to any alternative fuel, the amount (determined by the Secretary) of such fuel having a Btu content of 114,000.

“(4) QUALIFIED MOTOR VEHICLE.—The term ‘qualified motor vehicle’ means any motor vehicle (as defined in section 30(c)(2)) which meets any applicable Federal or State emissions standards with respect to each fuel by which such vehicle is designed to be propelled.

“(5) SOLD AT RETAIL.—

“(A) IN GENERAL.—The term ‘sold at retail’ means the sale, for a purpose other than resale, after manufacture, production, or importation.

“(B) USE TREATED AS SALE.—If any person uses alternative fuel (including any use after importation) as a fuel to propel any qualified alternative fuel motor vehicle (as defined in section 30B(d)(4)) before such fuel is sold at retail, then such use shall be treated in the same manner as if such fuel were sold at retail as a fuel to propel such a vehicle by such person.

“(c) Election to pass credit.—A person which sells alternative fuel at retail may elect to pass the credit allowable under this section to the purchaser of such fuel or, in the event the purchaser is a tax-exempt entity or otherwise declines to accept such credit, to the person which supplied such fuel, under rules established by the Secretary.

“(d) No double benefit.—The amount of any deduction or other credit allowable under this chapter for any fuel taken into account in computing the amount of the credit determined under subsection (a) shall be reduced by the amount of such credit attributable to such fuel.

“(e) Pass-thru in the case of estates and trusts.—Under regulations prescribed by the Secretary, rules similar to the rules of subsection (d) of section 52 shall apply.

“(f) Termination.—

“(1) IN GENERAL.—Except as provided in paragraph (2), this section shall not apply to any fuel sold at retail after December 31, 2011.

“(2) HYDROGEN FUEL.—In the case of an alternative fuel which is hydrogen fuel, this section shall not apply to any fuel sold at retail after December 31, 2015.”.

(b) Credit treated as business credit.—Section 38(b) (relating to current year business credit) is amended by striking “plus” at the end of paragraph (18), by striking the period at the end of paragraph (19) and inserting “, plus”, and by adding at the end the following new paragraph:

“(20) the alternative fuel retail sales credit determined under section 40B(a).”.

(c) Clerical amendment.—The table of sections for subpart D of part IV of subchapter A of chapter 1 is amended by inserting after the item relating to section 40A the following new item:


“Sec. 40B. Credit for retail sale of alternative fuels as motor vehicle fuel”.

(d) Effective date.—The amendments made by this section shall apply to fuel sold at retail after December 31, 2005, in taxable years ending after such date.

SEC. 318. Study of effectiveness of certain provisions by GAO.

(a) Study.—The Comptroller General of the United States shall undertake an ongoing analysis of—

(1) the effectiveness of the alternative motor vehicles and fuel incentives provisions under this Act, and

(2) the recipients of the tax benefits contained in such provisions, including an identification of such recipients by income and other appropriate measurements.

Such analysis shall quantify the effectiveness of such provisions by examining and comparing the Federal Government’s forgone revenue to the aggregate amount of energy actually conserved and tangible environmental benefits gained as a result of such provisions.

(b) Reports.—The Comptroller General of the United States shall report the analysis required under subsection (a) to Congress not later than December 31, 2006, and annually thereafter.

SEC. 319. Extension of deduction for certain refueling property.

(a) In general.—Section 179A(f) (relating to termination) is amended by striking “2006” and inserting “2009”.

(b) 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. 320. Credit for installation of alternative fueling stations.

(a) In general.—Subpart B of part IV of subchapter A of chapter 1 (relating to foreign tax credit, etc.), as amended by this Act, is amended by adding at the end the following new section:

“SEC. 30C. Clean-fuel vehicle refueling property credit.

“(a) Credit allowed.—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 amount paid or incurred by the taxpayer during the taxable year for the installation of qualified clean-fuel vehicle refueling property.

“(b) Limitation.—

“(1) IN GENERAL.—The credit allowed under subsection (a)—

“(A) with respect to any retail clean-fuel vehicle refueling property, shall not exceed $30,000, and

“(B) with respect to any residential clean-fuel vehicle refueling property, shall not exceed $1,000.

“(2) PHASEOUT.—

“(A) IN GENERAL.—Except as provided in subparagraph (B), in the case of any qualified clean-fuel vehicle refueling property placed in service after December 31, 2007, the limit otherwise applicable under paragraph (1) shall be reduced by—

“(i) 25 percent in the case of any vehicle placed in service in calendar year 2008, and

“(ii) 50 percent in the case of any vehicle placed in service in calendar year 2009.

“(B) HYDROGEN PROPERTY.—In the case of any qualified clean-fuel vehicle refueling property relating to hydrogen placed in service after December 31, 2011, the limit otherwise applicable under paragraph (1) shall be reduced by—

“(i) 25 percent in the case of any vehicle placed in service in calendar year 2012, and

“(ii) 50 percent in the case of any vehicle placed in service in calendar year 2013.

“(c) Year credit allowed.—The credit allowed under subsection (a) shall be allowed in the taxable year in which the qualified clean-fuel vehicle refueling property is placed in service by the taxpayer.

“(d) Definitions.—For purposes of this section—

“(1) QUALIFIED CLEAN-FUEL VEHICLE REFUELING PROPERTY.—The term ‘qualified clean-fuel vehicle refueling property’ has the same meaning given such term by section 179A(d).

“(2) RESIDENTIAL CLEAN-FUEL VEHICLE REFUELING PROPERTY.—The term ‘residential clean-fuel vehicle refueling property’ means qualified clean-fuel vehicle refueling property which is installed on property which is used as the principal residence (within the meaning of section 121) of the taxpayer.

“(3) RETAIL CLEAN-FUEL VEHICLE REFUELING PROPERTY.—The term ‘retail clean-fuel vehicle refueling property’ means qualified clean-fuel vehicle refueling property which is installed on property (other than property described in paragraph (2)) used in a trade or business of the taxpayer.

“(e) Application with other credits.—The credit allowed under subsection (a) for any taxable year shall not exceed the excess (if any) of—

“(1) the regular tax for the taxable year reduced by the sum of the credits allowable under subpart A and sections 27, 29, 30, and 30B, over

“(2) the tentative minimum tax for the taxable year.

“(f) Basis reduction.—For purposes of this title, the basis of any property shall be reduced by the portion of the cost of such property taken into account under subsection (a).

“(g) No double benefit.—No deduction shall be allowed under section 179A with respect to any property with respect to which a credit is allowed under subsection (a).

“(h) Refueling property installed for tax-exempt entities.—In the case of qualified clean-fuel vehicle refueling property installed on property owned or used by an entity exempt from tax under this chapter, the person which installs such refueling property for the entity shall be treated as the taxpayer with respect to the refueling property for purposes of this section (and such refueling property shall be treated as retail clean-fuel vehicle refueling property) and the credit shall be allowed to such person, but only if the person clearly discloses to the entity in any installation contract the specific amount of the credit allowable under this section.

“(i) Carryforward allowed.—

“(1) IN GENERAL.—If the credit amount allowable under subsection (a) for a taxable year exceeds the amount of the limitation under subsection (e) for such taxable year (referred to as the ‘unused credit year’ in this subsection), such excess shall be allowed as a credit carryforward for each of the 20 taxable years following the unused credit year.

“(2) RULES.—Rules similar to the rules of section 39 shall apply with respect to the credit carryforward under paragraph (1).

“(j) Special rules.—Rules similar to the rules of paragraphs (4) and (5) of section 179A(e) shall apply.

“(k) Regulations.—The Secretary shall prescribe such regulations as necessary to carry out the provisions of this section.

“(l) Termination.—This section shall not apply to any property placed in service—

“(1) in the case of property relating to hydrogen, after December 31, 2013, and

“(2) in the case of any other property, after December 31, 2009.”.

(b) Incentive for production of hydrogen at qualified clean-fuel vehicle refueling property.—Section 179A(d) (defining qualified clean-fuel vehicle refueling property) is amended by adding at the end the following new flush sentence:

“In the case of clean-burning fuel which is hydrogen produced from another clean-burning fuel, paragraph (3)(A) shall be applied by substituting ‘production, storage, or dispensing’ for ‘storage or dispensing’ both places it appears.”.

(c) Conforming amendments.—(1) Section 1016(a), as amended by this Act, is amended by striking “and” at the end of paragraph (31), by striking the period at the end of paragraph (32) and inserting “, and”, and by adding at the end the following new paragraph:

“(33) to the extent provided in section 30C(f).”.

(2) Section 55(c)(3) is amended by inserting “30C(e),” after “30B(e)”.

(3) The table of sections for subpart B of part IV of subchapter A of chapter 1, as amended by this Act, is amended by inserting after the item relating to section 30B the following new item:


“Sec. 30C. Clean-fuel vehicle refueling property credit”.

(d) 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. 321. Incentive for certain energy efficient property used in business.

(a) In general.—Part VI of subchapter B of chapter 1 is amended by adding at the end the following new section:

“SEC. 200. Energy property deduction.

“(a) In general.—There shall be allowed as a deduction for the taxable year an amount equal to the sum of—

“(1) the amount determined under subsection (b) for each energy property of the taxpayer placed in service during such taxable year, and

“(2) the energy efficient residential rental building property deduction determined under subsection (e).

“(b) Amount for energy property.—

“(1) IN GENERAL.—The amount determined under this subsection for the taxable year for each item of energy property shall equal the amount specified for such property in the following table:

Description of property: Allowable amount is:
Elected solar hot water property     $1.00 per each kwh/year of savings.
Photovoltaic property     $4.50 per peak watt.
Advanced main air circulating fan or a Tier 1 natural gas, propane, or oil water heater     $150.
Tier 2 energy-efficient building property     $900.
Tier 1 energy-efficient building property (other than an advanced main air circulating fan or a natural gas, propane, or oil water heater)     $450.””

“(2) ELECTED SOLAR HOT WATER PROPERTY.—In the case of elected solar hot water property, the taxpayer may elect to substitute ‘$21 per annual Therm of natural gas savings’ for ‘$1.00 per each kwh/year of savings’ in the table contained in paragraph (1).

“(c) Energy property defined.—

“(1) IN GENERAL.—For purposes of this part, the term ‘energy property’ means any property—

“(A) which is—

“(i) solar energy property,

“(ii) Tier 2 energy-efficient building property, or

“(iii) Tier 1 energy-efficient building property,

“(B)(i) the construction, reconstruction, or erection of which is completed by the taxpayer, or

“(ii) which is acquired by the taxpayer if the original use of such property commences with the taxpayer,

“(C) with respect to which depreciation (or amortization in lieu of depreciation) is allowable, and

“(D) which meets the performance and quality standards, and the certification requirements (if any), which—

“(i) have been prescribed by the Secretary by regulations (after consultation with the Secretary of Energy or the Administrator of the Environmental Protection Agency, as appropriate),

“(ii) in the case of the energy efficiency ratio (EER) for central air conditioners and electric heat pumps—

“(I) require measurements to be based on published data which is tested by manufacturers at 95 degrees Fahrenheit, and

“(II) may be based on certified data of the Air Conditioning and Refrigeration Institute,

“(iii) in the case of geothermal heat pumps—

“(I) shall be based on testing under the conditions of ARI/ISO Standard 13256–1 for Water Source Heat Pumps or ARI 870 for Direct Expansion GeoExchange Heat Pumps (DX), as appropriate, and

“(II) shall include evidence that water heating services have been provided through a desuperheater or integrated water heating system connected to the storage water heater tank, and

“(iv) are in effect at the time of the acquisition of the property.

“(2) SOLAR ENERGY PROPERTY.—In the case of—

“(A) elected solar hot water property, the regulations under paragraph (1)(D) shall be based on the OG–300 Standard for the Annual Performance of OG–300 Certified Systems of the Solar Rating and Certification Corporation, and

“(B) photovoltaics, such regulations shall be based on the ASTM Standard E 1036 and E 1036M–96 Standard Test Method for Electric Performance of Nonconcentrator Terrestrial Photovoltaic Modules and Arrays Using Reference Cells,

to the extent the Secretary determines such standards carry out the purposes of this section.

“(3) EXCEPTION.—Such term shall not include any property which is public utility property (as defined in section 46(f)(5) as in effect on the day before the date of the enactment of the Revenue Reconciliation Act of 1990).

“(d) Definitions relating to types of energy property.—For purposes of this section—

“(1) SOLAR ENERGY PROPERTY.—

“(A) IN GENERAL.—The term ‘solar energy property’ means equipment which uses solar energy—

“(i) to generate electricity, or

“(ii) to provide hot water for use in a structure.

“(B) ELECTED SOLAR HOT WATER PROPERTY.—

“(i) IN GENERAL.—The term ‘elected solar hot water property’ means property which is solar energy property by reason of subparagraph (A)(ii) and for which an election under this subparagraph is in effect.

“(ii) ELECTION.—For purposes of clause (i), a taxpayer may elect to treat property described in clause (i) as elected solar hot water property.

“(C) PHOTOVOLTAIC PROPERTY.—The term ‘photovoltaic property’ means solar energy property which uses a solar photovoltaic process to generate electricity.

“(D) SWIMMING POOLS, ETC., USED AS STORAGE MEDIUM.—The term ‘solar energy property’ shall not include a swimming pool, hot tub, or any other energy storage medium which has a function other than the function of such storage.

“(E) SOLAR PANELS.—No solar panel or other property installed as a roof (or portion thereof) shall fail to be treated as solar energy property solely because it constitutes a structural component of the structure on which it is installed.

“(2) TIER 2 ENERGY-EFFICIENT BUILDING PROPERTY.—The term ‘Tier 2 energy-efficient building property’ means—

“(A) an electric heat pump water heater which yields an energy factor of at least 2.0 in the standard Department of Energy test procedure,

“(B) an electric heat pump which has a heating seasonal performance factor (HSPF) of at least 9, a seasonal energy efficiency ratio (SEER) of at least 15, and an energy efficiency ratio (EER) of at least 13,

“(C) a geothermal heat pump which—

“(i) in the case of a closed loop product, has an energy efficiency ratio (EER) of at least 14.1 and a heating coefficient of performance (COP) of at least 3.3,

“(ii) in the case of an open loop product, has an energy efficiency ratio (EER) of at least 16.2 and a heating coefficient of performance (COP) of at least 3.6, and

“(iii) in the case of a direct expansion (DX) product, has an energy efficiency ratio (EER) of at least 15 and a heating coefficient of performance (COP) of at least 3.5,

“(D) a central air conditioner which has a seasonal energy efficiency ratio (SEER) of at least 15 and an energy efficiency ratio (EER) of at least 13, and

“(E) a natural gas, propane, or oil water heater which has an energy factor of at least 0.80.

“(3) TIER 1 ENERGY-EFFICIENT BUILDING PROPERTY.—The term ‘Tier 1 energy-efficient building property’ means—

“(A) an electric heat pump which has a heating system performance factor (HSPF) of at least 8.5, a cooling seasonal energy efficiency ratio (SEER) of at least 14, and an energy efficiency ratio (EER) of at least 12,

“(B) a central air conditioner which has a cooling seasonal energy efficiency ratio (SEER) of at least 14 and an energy efficiency ratio (EER) of at least 12,

“(C) a natural gas, propane, or oil water heater which has an energy factor of at least 0.65, and

“(D) an oil, natural gas, or propane furnace or hot water boiler which achieves at least 95 percent annual fuel utilization efficiency (AFUE).

“(4) ADVANCED MAIN AIR CIRCULATING FAN.—The term ‘advanced main air circulating fan’ means a fan used in a natural gas, propane, or oil furnace originally placed in service by the taxpayer during the taxable year, including a fan which uses a brushless permanent magnet motor or another type of motor which achieves similar or higher efficiency at full and half speed, as determined by the Secretary.

“(e) Energy efficient residential rental building property deduction.—

“(1) DEDUCTION ALLOWED.—For purposes of subsection (a)—

“(A) IN GENERAL.—The energy efficient residential rental building property deduction determined under this subsection is an amount equal to energy efficient residential rental building property expenditures made by a taxpayer for the taxable year.

“(B) MAXIMUM AMOUNT OF DEDUCTION.—The amount of energy efficient residential rental building property expenditures taken into account under subparagraph (A) with respect to each dwelling unit shall not exceed—

“(i) $6,000 in the case of a percentage reduction of 50 percent as determined under paragraph (2)(B), and

“(ii) $12,000 times the percentage reduction in the case of a percentage reduction of less than 50 percent as determined under paragraph (2)(B).

“(C) YEAR DEDUCTION ALLOWED.—The deduction under subparagraph (A) shall be allowed in the taxable year in which the construction, reconstruction, erection, or rehabilitation of the property is completed.

“(2) ENERGY EFFICIENT RESIDENTIAL RENTAL BUILDING PROPERTY EXPENDITURES.—For purposes of this subsection—

“(A) IN GENERAL.—The term ‘energy efficient residential rental building property expenditures’ means an amount paid or incurred in connection with construction, reconstruction, erection, or rehabilitation of energy efficient residential rental building property—

“(i) for which depreciation is allowable under section 167,

“(ii) which is located in the United States, and

“(iii) the construction, reconstruction, erection, or rehabilitation of which is completed by the taxpayer.

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

“(B) ENERGY EFFICIENT RESIDENTIAL RENTAL BUILDING PROPERTY.—

“(i) IN GENERAL.—The term ‘energy efficient residential rental building property’ means any property which reduces total annual energy and power costs with respect to heating and cooling of the building by a percentage certified according to clause (ii).

“(ii) PROCEDURES.—

“(I) IN GENERAL.—For purposes of clause (i), energy usage and costs shall be demonstrated by performance-based compliance.

“(II) PERFORMANCE-BASED COMPLIANCE.—Performance-based compliance shall be demonstrated by calculating the percent energy cost savings for heating and cooling, as applicable, with respect to a dwelling unit when compared to the original condition of the dwelling unit.

“(III) COMPUTER SOFTWARE.—Computer software shall be used in support of performance-based compliance under subclause (II) and such software shall meet all of the procedures and methods for calculating energy savings reductions which are promulgated by the Secretary of Energy. Such regulations on the specifications for software and verification protocols shall be based on the 2005 California Residential Alternative Calculation Method Approval Manual.

“(IV) CALCULATION REQUIREMENTS.—In calculating tradeoffs and energy performance, the regulations prescribed under this clause shall prescribe for the taxable year the costs per unit of energy and power, such as kilowatt hour, kilowatt, gallon of fuel oil, and cubic foot or Btu of natural gas, which may be dependent on time of usage. Where a State has developed annual energy usage and cost reduction procedures based on time of usage costs for use in the performance standards of the State’s building energy code prior to the effective date of this section, the State may use those annual energy usage and cost reduction procedures in lieu of those adopted by the Secretary.

“(V) APPROVAL OF SOFTWARE SUBMISSIONS.—The Secretary shall approve software submissions which comply with the requirements of subclause (III).

“(VI) PROCEDURES FOR INSPECTION AND TESTING OF HOMES.—The Secretary shall ensure that procedures for the inspection and testing for compliance comply with the calculation requirements under subclause (IV) of this clause and clause (iv).

“(iii) DETERMINATIONS OF COMPLIANCE.—A determination of compliance with respect to energy efficient residential rental building property made for the purposes of this subparagraph shall be filed with the Secretary not later than 1 year after the date of such determination and shall include the TIN of the certifier, the address of the building in compliance, and the identity of the person for whom such determination was performed. Determinations of compliance filed with the Secretary shall be available for inspection by the Secretary of Energy.

“(iv) COMPLIANCE.—

“(I) IN GENERAL.—The Secretary, after consultation with the Secretary of Energy, shall establish requirements for certification and compliance procedures after examining the requirements for energy consultants and home energy ratings providers specified by the Mortgage Industry National Home Energy Rating Standards.

“(II) INDIVIDUALS QUALIFIED TO DETERMINE COMPLIANCE.—The determination of compliance may be 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. All providers shall be accredited, or otherwise authorized to use approved energy performance measurement methods, by the Residential Energy Services Network (RESNET).

“(C) ALLOCATION OF DEDUCTION FOR PUBLIC PROPERTY.—In the case of energy efficient residential rental building property which is public property, the Secretary shall promulgate a regulation to allow the allocation of the deduction to the person primarily responsible for designing the improvements to the property in lieu of the public entity which is the owner of such property. Such person shall be treated as the taxpayer for purposes of this subsection.

“(f) Special rules.—For purposes of this section—

“(1) BASIS REDUCTION.—For purposes of this subtitle, if a deduction is allowed under this section with respect to any property, the basis of such property shall be reduced by the amount of the deduction so allowed.

“(2) DOUBLE BENEFIT.—Property which would, but for this paragraph, be eligible for deduction under more than one provision of this section shall be eligible only under one such provision, the provision specified by the taxpayer.

“(g) Regulations.—The Secretary shall promulgate such regulations as necessary to take into account new technologies regarding energy efficiency and renewable energy for purposes of determining energy efficiency and savings under this section.

“(h) Termination.—This section shall not apply with respect to—

“(1) any energy property placed in service after December 31, 2010 (December 31, 2006, in the case of Tier 1 energy-efficient building property), and

“(2) any energy efficient residential rental building property expenditures in connection with property—

“(A) placed in service after December 31, 2008, or

“(B) the construction, reconstruction, erection, or rehabilitation of which is not completed on or before December 31, 2008.”.

(b) Conforming amendments.—

(1) Section 48(a)(3)(A) is amended to read as follows:

“(A) which is equipment used to produce, distribute, or use energy derived from a geothermal deposit (within the meaning of section 613(e)(2)), but only, in the case of electricity generated by geothermal power, up to (but not including) the electrical transmission stage,”.

(2) Subparagraph (B) of section 168(e)(3) is amended—

(A) in clause (vi)(I)—

(i) by striking “section 48(a)(3)” and inserting “section 200(d)(1)”, and

(ii) by striking “clause (i)” and inserting “such subparagraph (A)”, and

(B) in the last sentence, by striking “section 48(a)(3)” and inserting “section 200(c)(3)”.

(3) Section 1016(a) is amended by striking “and” at the end of paragraph (32), by striking the period at the end of paragraph (33) and inserting “, and”, and by inserting the following new paragraph:

“(34) for amounts allowed as a deduction under section 200(a).”.

(c) Clerical amendment.—The table of sections for part VI of subchapter B of chapter 1 is amended by adding at the end the following new item:


“Sec. 200. Energy property deduction”.

(d) Authorization of appropriations.—There are authorized to be appropriated to the Department of Energy out of amounts not already appropriated such sums as necessary to carry out this section.

(e) Effective date.—The amendments made by this section shall apply to taxable years beginning after December 31, 2005.

SEC. 322. Energy efficient commercial buildings deduction.

(a) In general.—Part VI of subchapter B of chapter 1 (relating to itemized deductions for individuals and corporations) is amended by inserting after section 179B the following new section:

“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) $2.25, 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 any building located in the United States,

“(B) which is installed as part of—

“(i) the interior 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)(6) as being installed as part of a plan designed to reduce the total annual energy and power costs with respect to the interior 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).

A building described in subparagraph (A) may include any residential rental property, including any low-rise multifamily structure or single family housing property which is not within the scope of Standard 90.1–2001, but shall not include any highly energy-efficient principal residence (within the meaning of section 45J(b)) for which a credit under section 45J has been allowed.

“(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), if—

“(i) the requirement of subsection (c)(1)(C) is not met, but

“(ii) there is a certification in accordance with paragraph (6) 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 ‘$.75’ for ‘$2.25’.

“(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 consumption and cost, based on the provisions of the 2005 California Nonresidential Alternative Calculation Method Approval Manual or, in the case of residential property, the 2005 California Residential Alternative Calculation Method Approval Manual. These regulations shall meet the following requirements:

“(A) In calculating tradeoffs and energy performance, the regulations shall prescribe the costs per unit of energy and power, such as kilowatt hour, kilowatt, gallon of fuel oil, and cubic foot or Btu of natural gas, which may be dependent on time of usage. If a State has developed annual energy usage and cost calculation procedures based on time of usage costs for use in the performance standards of the State’s building energy code before the effective date of this section, the State may use those annual energy usage and cost calculation procedures in lieu of those adopted by the Secretary.

“(B) The calculation methods under this paragraph need not comply fully with section 11 of Standard 90.1–2001.

“(C) The calculation methods shall be fuel neutral, such that the same energy efficiency features shall qualify a building for the deduction under this section regardless of whether the heating source is a gas or oil furnace or an electric heat pump. The reference building for a proposed design which employs electric resistance heating shall be modeled as using a heat pump.

“(D) The calculation methods shall provide appropriate calculated energy savings for design methods and technologies not otherwise credited in either Standard 90.1–2001 or in the 2005 California Nonresidential Alternative Calculation Method Approval Manual, including the following:

“(i) Natural ventilation.

“(ii) Evaporative cooling.

“(iii) Automatic lighting controls such as occupancy sensors, photocells, and timeclocks.

“(iv) Daylighting.

“(v) Designs utilizing semi-conditioned spaces which maintain adequate comfort conditions without air conditioning or without heating.

“(vi) Improved fan system efficiency, including reductions in static pressure.

“(vii) Advanced unloading mechanisms for mechanical cooling, such as multiple or variable speed compressors.

“(viii) The calculation methods may take into account the extent of commissioning in the building, and allow the taxpayer to take into account measured performance which exceeds typical performance.

“(ix) On-site generation of electricity, including combined heat and power systems, fuel cells, and renewable energy generation such as solar energy.

“(x) Wiring with lower energy losses than wiring satisfying Standard 90.1–2001 requirements for building power distribution systems.

“(3) COMPUTER SOFTWARE.—

“(A) IN GENERAL.—Any calculation under paragraph (2) shall be prepared by qualified computer software.

“(B) QUALIFIED COMPUTER SOFTWARE.—For purposes of this paragraph, the term ‘qualified computer software’ means software—

“(i) for which the software designer has certified that the software meets all procedures and detailed methods for calculating energy and power consumption and costs as required by the Secretary,

“(ii) which provides such forms as required to be filed by the Secretary in connection with energy efficiency of property and the deduction allowed under this section, and

“(iii) which provides a notice form which documents the energy efficiency features of the building and its projected annual energy costs.

“(4) ALLOCATION OF DEDUCTION FOR PUBLIC PROPERTY.—In the case of energy efficient commercial building property installed on or in public property, the Secretary shall promulgate a regulation to allow the allocation of the deduction to the person primarily responsible for designing the property in lieu of the public entity which is the owner of such property. Such person shall be treated as the taxpayer for purposes of this section.

“(5) 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 as provided in the notice under paragraph (3)(B)(iii).

“(6) 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 comparable, given the difference between commercial and residential buildings, to the requirements in the Mortgage Industry National Accreditation Procedures for Home Energy Rating Systems.

“(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) Coordination with other tax benefits.—

“(1) NO DOUBLE BENEFIT.—No deduction shall be allowed under subsection (a) with respect to any building for which a credit under section 45J has been allowed.

“(2) SPECIAL RULE WITH RESPECT TO BUILDINGS WITH ENERGY EFFICIENT PROPERTY.—In any case in which a deduction under section 200 or a credit under section 25C has been allowed with respect to property in connection with a building, the annual energy and power costs of the reference building referred to in subsection (c)(1)(C) shall be determined assuming such reference building contains the property for which such deduction or credit has been allowed.

“(h) 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.

“(i) Termination.—This section shall not apply with respect to property placed in service after December 31, 2010.”.

(b) Conforming amendments.—

(1) Section 1016(a) is amended by striking “and” at the end of paragraph (33), by striking the period at the end of paragraph (34) and inserting “, and”, and by adding at the end the following new paragraph:

“(35) to the extent provided in section 179C(e).”.

(2) Section 1245(a) is amended by inserting “179C,” after “179B,” both places it appears in paragraphs (2)(C) and (3)(C).

(3) Section 1250(b)(3) is amended by inserting before the period at the end of the first sentence “or by section 179C”.

(4) Section 263(a)(1) is amended by striking “or” at the end of subparagraph (H), by striking the period at the end of subparagraph (I) and inserting “, or”, and by inserting after subparagraph (I) the following new subparagraph:

“(J) expenditures for which a deduction is allowed under section 179C.”.

(5) Section 312(k)(3)(B) is amended by striking “section 179, 179A, or 179B” each place it appears in the heading and text and inserting “section 179, 179A, 179B, or 179C”.

(c) Clerical amendment.—The table of sections for part VI of subchapter B of chapter 1 is amended by inserting after the item relating to section 179B the following new item:


“Sec. 179C. Energy efficient commercial buildings deduction”.

(d) 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. 323. Credit for construction of new highly energy-efficient homes.

(a) In general.—Subpart D of part IV of subchapter A of chapter 1 (relating to business related credits) is amended by inserting after section 45I the following:

“SEC. 45J. New highly energy-efficient home credit.

“(a) In general.—For purposes of section 38, in the case of an eligible contractor, the credit determined under this section for the taxable year is an amount equal to the credit amount specified in the following table for a new, highly energy-efficient principal residence:


“New, highly energy-efficient principal residence: Credit amount:
30 percent property $1,000
50 percent property $2,000

“(b) Highly energy-efficient principal residence.—For purposes of this section—

“(1) IN GENERAL.—The term ‘highly energy-efficient principal residence’ means a dwelling—

“(A) located in the United States,

“(B) the construction of which is substantially completed after December 31, 2005,

“(C) the original use of which is as a principal residence (within the meaning of section 121) which commences with the person who acquires such dwelling from the eligible contractor, and

“(D) which is certified before such use commences as being 50 percent property or 30 percent property.

“(2) 50 OR 30 PERCENT PROPERTY.—

“(A) IN GENERAL.—For purposes of paragraph (1), property is 50 percent property or 30 percent property if the projected heating and cooling energy usage of such property, measured in terms of average annual energy cost to taxpayer, is reduced by 50 percent, or 30 percent, respectively, in comparison to the energy usage of the standard design reference house as determined using the procedures under subparagraph (D).

“(B) STANDARD DESIGN REFERENCE HOUSE.—For purposes of this subsection, the term ‘standard design reference house’ means a dwelling which conforms with the standards of chapter 4 of the 2000 International Energy Conservation Code of the International Code Council and the minimum equipment efficiency standards promulgated by the Department of Energy under the National Appliance Energy Conservation Act.

“(C) ENERGY EFFICIENT REFERENCE HOUSE.—For purposes of this paragraph, the term ‘energy efficient reference house’ means a design of a dwelling which uses the same heating fuel type as the proposed design and which uses minimum standards equipment, as required by the Department of Energy under the National Appliance Energy Conservation Act and which achieves, on average over fuel type and house geometry, the required 30 percent or 50 percent reductions in annual energy cost as calculated using the procedures under subparagraph (D).

“(D) PROCEDURES.—

“(i) IN GENERAL.—For purposes of subparagraph (A), energy usage shall be demonstrated either by a component-based approach or a performance-based approach.

“(ii) COMPONENT APPROACH.—Compliance by the component approach is achieved when all of the components of the house comply with the requirements of prescriptive packages established by the Secretary of Energy, in consultation with the Administrator of the Environmental Protection Agency, such that they are equivalent, for the strong majority of houses which can use this method, to the results of using the performance-based approach of clause (iii) to achieve the required reduction in energy usage.

“(iii) PERFORMANCE-BASED APPROACH.—Performance-based compliance shall be demonstrated in terms of equivalent or less energy usage when compared to the energy efficient reference house of the same heating fuel type as the dwelling concerned or through an alternate method prescribed by the Secretary which yields equivalent results.

“(iv) COMPUTER SOFTWARE.—Computer software shall be used in support of performance-based compliance under clause (iii) and such software shall meet all of the procedures and methods for calculating energy savings reductions that are promulgated by the Secretary of Energy. Such regulations on the specifications for software and verification protocols shall be based on the 2005 California Residential Alternative Calculation Method Approval Manual.

“(v) FUEL PARITY.—In the case of both the component and the performance-based approaches, and any software used in support of either such approach, the Secretary shall assure fuel parity by requiring both the energy efficient reference house and the prescriptive package under clause (ii) to employ the same envelope energy efficiency measures for a house heated by a gas furnace as for a house heated by an electric air source heat pump or by an oil furnace or boiler; and, for equipment efficiency, to employ electric, oil, or gas equipment efficiency of corresponding efficiency improvement. Such determination of corresponding efficiency improvement shall be made on a linear scale between the minimum standard equipment efficiency and the best available marketplace technology efficiency as determined by the Secretary after considering the information provided by the Air Conditioning and Refrigeration Institute (ARI) and the Gas Appliance Manufacturers Association (GAMA) guides for the respective electric, oil, and natural gas equipment of such type (such as heating and cooling).

“(vi) APPROVAL OF SOFTWARE SUBMISSIONS.—The Secretary shall approve software submissions that comply with the calculation requirements of clause (iv).

“(vii) PROCEDURES FOR INSPECTION AND TESTING OF HOMES.—The Secretary shall ensure that procedures for the inspection and testing for compliance comply with the calculation requirements under clause (iv).

“(3) DETERMINATIONS OF COMPLIANCE.—A determination of compliance made for the purposes of this subsection shall be filed with the Secretary within 1 year after the date of such determination and shall include the TIN of the certifier, the address of the building in compliance, and the identity of the person for whom such determination was performed. Determinations of compliance filed with the Secretary shall be available for inspection by the Secretary of Energy.

“(4) COMPLIANCE.—

“(A) IN GENERAL.—The Secretary, in consultation with the Secretary of Energy shall establish requirements for certification and compliance procedures after examining the requirements for energy consultants and home energy ratings providers specified by the Mortgage Industry National Accreditation Procedures for Home Energy Rating Systems.

“(B) INDIVIDUALS QUALIFIED TO DETERMINE COMPLIANCE.—Individuals qualified to determine compliance shall be only those individuals who are recognized by an organization certified by the Secretary for such purposes. The Secretary may qualify a Home Energy Rating Systems Organization, a local building code agency, a State or local energy office, a utility, or other organizations which meet the requirements prescribed under this section.

“(5) FORM PROVIDED TO BUYER.—

“(A) IN GENERAL.—A form documenting the energy-efficiency of the dwelling, including the rated energy efficiency performance of equipment installed in the dwelling, shall be provided to the buyer of the dwelling. The form shall include labeled R-value for insulation products, NFRC-labeled U-factor and Solar Heat Gain Coefficient for windows, skylights, and doors, labeled AFUE ratings for furnaces and boilers, labeled HSPF ratings for electric heat pumps, and labeled SEER ratings for air conditioners.

“(B) RATINGS LABEL AFFIXED IN DWELLING.—A permanent label documenting the ratings in subparagraph (A) shall be affixed to the front of the electrical distribution panel of the dwelling, or shall be otherwise permanently displayed in a readily inspectable location in the dwelling.

“(c) Additional definitions.—For purposes of this section—

“(1) ELIGIBLE CONTRACTOR.—The term ‘eligible contractor’ means the person who constructed the new energy-efficient home, or in the case of a manufactured home which conforms to Federal Manufactured Home Construction and Safety Standards (24 C.F.R. 3280), the manufactured home producer of such home.

“(2) CONSTRUCTION.—The term ‘construction’ includes reconstruction and rehabilitation.

“(3) 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.

“(4) MANUFACTURED HOME INCLUDED.—The term ‘dwelling’ includes a manufactured home conforming to Federal Manufactured Home Construction and Safety Standards (24 C.F.R. 3280).

“(d) Coordination with other credits.—Property which would, but for this paragraph, be eligible for credit under more than one provision of this section shall be eligible only under one such provision, the provision specified by the taxpayer.

“(e) 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.

“(f) Termination.—Subsection (a) shall apply to dwellings purchased during the period beginning on January 1, 2006, and ending on December 31, 2010.”.

(b) Credit made part of general business credit.—Section 38(b) (relating to current year business credit) is amended by striking “plus” at the end of paragraph (19), by striking the period at the end of paragraph (20) and inserting “, plus”, and by adding at the end the following:

“(21) the new highly energy-efficient home credit determined under section 45J.”.

(c) Denial of double benefit.—Section 280C (relating to certain expenses for which credits are allowable) is amended by adding at the end the following:

“(e) New energy-efficient home expenses.—No deduction shall be allowed for that portion of expenses for a new highly energy-efficient home otherwise allowable as a deduction for the taxable year which is equal to the amount of the credit determined for such taxable year under section 45J.”.

(d) Credit allowed against regular and minimum tax.—

(1) IN GENERAL.—Section 38(c) (relating to limitation based on amount of tax) is amended by redesignating paragraph (5) as paragraph (6) and by inserting after paragraph (4) the following new paragraph:

“(5) SPECIAL RULES FOR NEW ENERGY EFFICIENT HOME CREDIT.—

“(A) IN GENERAL.—In the case of the new energy efficient home credit—

“(i) this section and section 39 shall be applied separately with respect to the credit, and

“(ii) in applying paragraph (1) to the credit—

“(I) subparagraphs (A) and (B) thereof shall not apply, and

“(II) the limitation under paragraph (1) (as modified by subclause (I)) shall be reduced by the credit allowed under subsection (a) for the taxable year (other than the new energy efficient home credit).

“(B) NEW HIGHLY ENERGY EFFICIENT HOME CREDIT.—For purposes of this subsection, the term ‘new highly energy efficient home credit’ means the credit allowable under subsection (a) by reason of section 45J.”.

(2) CONFORMING AMENDMENT.—Subclause (II) of section 38(c)(2)(A)(ii) is amended by inserting “or the new highly energy efficient home credit” after “employment credit”.

(e) Deduction for certain unused business credits.—Subsection (c) of section 196 is amended by striking “and” at the end of paragraph (11), by striking the period at the end of paragraph (12) and inserting “, and”, and by adding after paragraph (12) the following:

“(13) the new highly energy-efficient home credit determined under section 45J.”.

(f) Clerical amendment.—The table of sections for subpart D of part IV of subchapter A of chapter 1 is amended by inserting after the item relating to section 45I the following:


“Sec. 45J. New highly energy-efficient home credit”.

(g) Effective date.—The amendments made by this section shall apply to taxable years ending after December 31, 2005.

SEC. 324. Credit for energy efficient appliances.

(a) In general.—Subpart D of part IV of subchapter A of chapter 1 (relating to business-related credits) is amended by adding after section 45J the following:

“SEC. 45K. Energy efficient appliance credit.

“(a) General rule.—For purposes of section 38, the energy efficient appliance credit determined under this section for the taxable year is an amount equal to the applicable amount determined under subsection (b) with respect to qualified energy efficient appliances produced by the taxpayer during the calendar year ending with or within the taxable year.

“(b) Applicable Amount.—For purposes of subsection (a), the applicable amount determined under this subsection with respect to a taxpayer is the sum of—

“(1) in the case of an energy efficient clothes washer described in subsection (d)(2)(A) or an energy efficient refrigerator described in subsection (d)(3)(B)(i), an amount equal to—

“(A) $50, multiplied by

“(B) the number of such washers and refrigerators produced by the taxpayer during such calendar year, and

“(2) in the case of an energy efficient clothes washer described in subsection (d)(2)(B) or an energy efficient refrigerator described in subsection (d)(3)(B)(ii), an amount equal to—

“(A) $100, multiplied by

“(B) the number of such washers and refrigerators produced by the taxpayer during such calendar year.

“(c) Limitation on maximum credit.—

“(1) IN GENERAL.—The maximum amount of credit allowed under subsection (a) with respect to a taxpayer for all taxable years shall be—

“(A) $30,000,000 with respect to the credit determined under subsection (b)(1), and

“(B) $30,000,000 with respect to the credit determined under subsection (b)(2).

“(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 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.

“(d) Qualified energy efficient appliance.—For purposes of this section—

“(1) IN GENERAL.—The term ‘qualified energy efficient appliance’ means—

“(A) an energy efficient clothes washer, or

“(B) an energy efficient refrigerator.

“(2) ENERGY EFFICIENT CLOTHES WASHER.—The term ‘energy efficient clothes washer’ means a residential clothes washer, including a residential style coin operated washer, which is manufactured with—

“(A) a 8.5 Water Factor (referred to in this paragraph as ‘WF’) (as determined by the Secretary) and a 1.60 Modified Energy Factor (referred to in this paragraph as ‘MEF’) (as determined by the Secretary of Energy) for calendar years 2006 through 2008, or

“(B) a 7.5 WF (as determined by the Secretary) and a 1.80 MEF (as determined by the Secretary of Energy) for calendar years after 2008.

“(3) ENERGY EFFICIENT REFRIGERATOR.—The term ‘energy efficient refrigerator’ means an automatic defrost refrigerator-freezer which—

“(A) has an internal volume of at least 16.5 cubic feet, and

“(B) consumes—

“(i) 15 percent less kw/hr/yr than the energy conservation standards promulgated by the Department of Energy for such refrigerator for 2005, or

“(ii) 20 to 25 percent less kw/hr/yr than such energy conservation standards.

“(e) Special Rules.—

“(1) IN GENERAL.—Rules similar to the rules of subsections (c), (d), and (e) of section 52 shall apply for purposes of this section.

“(2) AGGREGATION RULES.—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 one person for purposes of subsection (a).

“(f) Verification.—The taxpayer shall submit such information or certification as the Secretary, in consultation with the Secretary of Energy, determines necessary to claim the credit amount under subsection (a).

“(g) Termination.—This section shall not apply to qualified energy efficient appliances produced in calendar years beginning after 2010.”.

(b) Conforming amendment.—Section 38(b) (relating to general business credit) is amended by striking “plus” at the end of paragraph (20), by striking the period at the end of paragraph (21) and inserting “, plus”, and by adding at the end the following new paragraph:

“(22) the energy efficient appliance credit determined under section 45K(a).”.

(c) Clerical amendment.—The table of sections for subpart D of part IV of subchapter A of chapter 1 is amended by inserting after the item relating to section 45J the following new item:


“Sec. 45K. Energy efficient appliance credit”.

(d) Effective date.—The amendments made by this section shall apply to taxable years beginning after December 31, 2005.

SEC. 325. Credit for distributed energy generation and demand management property.

(a) In general.—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:

“SEC. 48A. Energy credit.

“(a) In general.—For purposes of section 46, the energy credit for any taxable year is the energy percentage of the basis of each energy property placed in service during such taxable year.

“(b) Energy percentage.—

“(1) IN GENERAL.—The energy percentage is—

“(A) except as otherwise provided in this subparagraph, 10 percent,

“(B) in the case of energy property described in clauses (ii), (iv), and (v) of subsection (c)(1)(A), 20 percent,

“(C) in the case of energy property described in subsection (c)(1)(A)(vii), 15 percent,

“(D) in the case of energy property described in subsection (c)(1)(A)(iii) relating to a high risk geothermal well, 20 percent, and

“(E) in the case of energy property described in subsection (c)(1)(A)(i), 50 percent.

“(2) COORDINATION WITH REHABILITATION.—The energy percentage shall not apply to that portion of the basis of any property which is attributable to qualified rehabilitation expenditures as determined under section 47.

“(c) Energy property defined.—

“(1) IN GENERAL.—For purposes of this subpart, the term ‘energy property’ means any property—

“(A) which is—

“(i) photovoltaic property,

“(ii) other solar energy property,

“(iii) geothermal energy property,

“(iv) energy-efficient building property other than property described in clauses (iii)(I) and (v)(I) of subsection (d)(3)(A),

“(v) combined heat and power system property,

“(vi) qualified anaerobic digester property,

“(vii) waste conversion property, or

“(viii) adjustable speed drive property,

“(B)(i) the construction, reconstruction, or erection of which is completed by the taxpayer, or

“(ii) which is acquired by the taxpayer if the original use of such property commences with the taxpayer,

“(C) which can reasonably be expected to remain in operation for at least 5 years,

“(D) with respect to which depreciation (or amortization in lieu of depreciation) is allowable, and

“(E) which meets the performance and quality standards (if any) which—

“(i) have been prescribed by the Secretary by regulations (after consultation with the Secretary of Energy), and

“(ii) are in effect at the time of the acquisition of the property.

“(2) EXCEPTION FOR PUBLIC UTILITY PROPERTY.—Such term shall not include any property which is public utility property (as defined in section 46(f)(5) as in effect on the day before the date of the enactment of the Revenue Reconciliation Act of 1990), except for property described in paragraph (1)(A)(iv).

“(d) Limitation on credit for photovoltaic property.—

“(1) IN GENERAL.—The credit allowed under this section which is attributable to photovoltaic property shall not exceed the sum of—

“(A) the applicable low-wattage rate multiplied by the number of watts of generating capacity of the property which does not exceed 10 kilowatts, plus

“(B) the applicable high-wattage rate multiplied by the number of watts of generating capacity of the property in excess of 10 kilowatts (if any).

“(2) APPLICABLE LOW- AND HIGH-WATTAGE RATES.—For purposes of this subsection, the applicable low- and high-wattage rates shall be determined under the following table:


“In the case of taxable years beginning in calendar year: The applicable low-wattage rate is: The applicable high-wattage rate is:
2006 $3.00 $2.00
2007 $2.85 $1.90
2008 $2.70 $1.80
2009 $2.55 $1.70
2010 and thereafter $2.40 $1.60

“(3) GENERATING CAPACITY.—For purposes of this subsection, generating capacity shall be measured as the rated peak power output of a system’s component modules as established by the American Society for Testing and Materials. Any photovoltaic property which is electrically contiguous or serves the same customer load shall be treated as one system for purposes of this section.

“(e) Definitions relating to types of energy property.—For purposes of this section—

“(1) SOLAR ENERGY PROPERTY.—

“(A) PHOTOVOLTAIC PROPERTY.—The term ‘photovoltaic property’ means equipment—

“(i) which uses solar energy to generate electricity, and

“(ii) which the taxpayer has elected (at such time and in such form and manner as the Secretary may specify) to treat as photovoltaic property for purposes of this section.

“(B) OTHER SOLAR ENERGY PROPERTY.—The term ‘other solar energy property’ means equipment—

“(i) which uses solar energy to generate electricity, to heat or cool (or provide hot water for use in) a structure, or to provide solar process heat, and

“(ii) which is not photovoltaic property.

“(C) SWIMMING POOLS, ETC. USED AS STORAGE MEDIUM.—Photovoltaic and other solar energy property shall not include property with respect to which expenditures are properly allocable to a swimming pool, hot tub, or any other energy storage medium which has a function other than the function of such storage.

“(D) SOLAR PANELS.—No solar panel or other property installed as a roof (or portion thereof) shall fail to be treated as photovoltaic or other solar energy property solely because it constitutes a structural component of the structure on which it is installed.

“(2) GEOTHERMAL ENERGY PROPERTY.—

“(A) IN GENERAL.—The term ‘geothermal energy property’ means equipment used to produce, distribute, or use energy derived from a geothermal deposit (within the meaning of section 613(e)(2)), but only, in the case of electricity generated by geothermal power, up to (but not including) the electrical transmission stage.

“(B) HIGH RISK GEOTHERMAL WELL.—The term ‘high risk geothermal well’ means a geothermal deposit (within the meaning of section 613(e)(2)) which requires high risk drilling techniques. Such deposit may not be located in a State or national park or in an area in which the relevant State park authority or the National Park Service determines the development of such a deposit will negatively impact on a State or national park.

“(3) ENERGY-EFFICIENT BUILDING PROPERTY.—

“(A) IN GENERAL.—The term ‘energy-efficient building property’ means—

“(i) a fuel cell which—

“(I) generates electricity using an electrochemical process,

“(II) has an electricity-only generation efficiency greater than 30 percent, and

“(III) has a minimum generating capacity of 1 kilowatt,

“(ii) an electric heat pump hot water heater which yields an energy factor of 2.0 or greater under test procedures prescribed by the Secretary of Energy,

“(iii)(I) an electric heat pump which has a heating system performance factor (HSPF) of at least 8.5 but less than 9 and a cooling seasonal energy efficiency ratio (SEER) of at least 14 but less than 15 and an energy efficiency ratio (EER) of at least 12,

“(II) an electric heat pump which has a heating system performance factor (HSPF) of 9 or greater and a cooling seasonal energy efficiency ratio (SEER) of 15 or greater and an energy efficiency ratio (EER) of at least 13,

“(iv) a natural gas heat pump which has a coefficient of performance of not less than 1.25 for heating and not less than 0.80 for cooling,

“(v)(I) a central air conditioner which has a cooling seasonal energy efficiency ratio (SEER) of at least 14 but less than 15 and an energy efficiency ratio (EER) of at least 12,

“(II) a central air conditioner which has a cooling seasonal energy efficiency ratio (SEER) of 15 or greater and an energy efficiency ratio (EER) of at least 13,

“(vi) an advanced natural gas water heater which—

“(I) increases steady state efficiency and reduces standby and vent losses, and

“(II) has an energy factor of at least 0.80, and

“(vii) an advanced natural gas furnace which achieves a 95 percent AFUE and rated for seasonal electricity use of less than 300 kWh per year.

“(B) LIMITATIONS.—The credit under subsection (a) for the taxable year may not exceed—

“(i) $500 in the case of property described in subparagraph (A) other than clauses (i) and (iv) thereof,

“(ii) $500 for each kilowatt of capacity in the case of any fuel cell described in subparagraph (A)(i), and

“(iii) $3,000 in the case of any natural gas heat pump described in subparagraph (A)(iv).

“(4) COMBINED HEAT AND POWER SYSTEM PROPERTY.—

“(A) IN GENERAL.—The term ‘combined heat and power system property’ means property—

“(i) comprising a system for the same energy source for the simultaneous or sequential generation of electrical power, mechanical shaft power, or both, in combination with steam, heat, or other forms of useful energy,

“(ii) which has an electrical capacity of more than 20 kilowatts or a mechanical energy capacity of more than 67 horsepower or an equivalent combination of electrical and mechanical energy capacities,

“(iii) which produces—

“(I) at least 20 percent of its total useful energy in the form of thermal energy, and

“(II) at least 20 percent of its total useful energy in the form of electrical or mechanical power (or a combination thereof), and

“(iv) the energy efficiency percentage of which exceeds—

“(I) 60 percent in the case of a system with an electrical capacity of less than 1 megawatt,

“(II) 65 percent in the case of a system with an electrical capacity of not less than 1 megawatt and not in excess of 50 megawatts, and

“(III) 70 percent in the case of a system with an electrical capacity in excess of 50 megawatts.

“(B) SPECIAL RULES.—

“(i) ENERGY EFFICIENCY PERCENTAGE.—For purposes of subparagraph (A)(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

“(II) the denominator of which is the lower heating value of the primary fuel source for the system.

“(ii) DETERMINATIONS MADE ON BTU BASIS.—The energy efficiency percentage shall be determined on a Btu basis.

“(iii) INPUT AND OUTPUT PROPERTY NOT INCLUDED.—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.

“(iv) ACCOUNTING RULE FOR PUBLIC UTILITY PROPERTY.—If the combined heat and power system property is public utility property (as defined in section 46(f)(5) as in effect on the day before the date of the enactment of the Revenue Reconciliation Act of 1990), the taxpayer may only claim the credit under subsection (a)(1) if, with respect to such property, the taxpayer uses a normalization method of accounting.

“(5) QUALIFIED ANAEROBIC DIGESTER PROPERTY.—The term ‘qualified anaerobic digester property’ means an anaerobic digester for manure or crop waste which achieves at least 65 percent efficiency measured in terms of the fraction of energy input converted to electricity and useful thermal energy.

“(6) WASTE CONVERSION PROPERTY.—The term ‘waste conversion property’ means equipment used to produce a usable liquid or gaseous synthetic fuel derived from a waste feedstock (including plastic waste and biomass (as defined in section 29(c)).

“(7) ADJUSTABLE SPEED DRIVE PROPERTY.—

“(A) IN GENERAL.—The term ‘adjustable speed drive property’ means equipment installed as part of an electric motor driven system of 10 horsepower or greater—

“(i) that is used to adjust the speed of the electric motor drive output to the requirements of a fluctuating load, and

“(ii) that achieves an energy savings of at least 20 percent during a complete cycle of operation.

“(B) LIMITATION.—In the case of adjustable speed drive property placed in service during the taxable year, the credit under subsection (a) for such year may not exceed $10,000 for each item of such property.

“(C) COORDINATION WITH DEDUCTION FOR ENERGY-EFFICIENT COMMERCIAL BUILDING PROPERTY.—The energy percentage shall apply to the basis of adjustable speed drive property after adjustment under section 1016(a)(34).

“(f) Special Rules.—For purposes of this section—

“(1) SPECIAL RULE FOR PROPERTY FINANCED BY SUBSIDIZED ENERGY FINANCING OR INDUSTRIAL DEVELOPMENT BONDS.—

“(A) REDUCTION OF BASIS.—For purposes of applying the energy percentage to any property, if such property is financed in whole or in part by—

“(i) subsidized energy financing, or

“(ii) the proceeds of a private activity bond (within the meaning of section 141) the interest on which is exempt from tax under section 103, the amount taken into account as the basis of such property shall not exceed the amount which (but for this subparagraph) would be so taken into account multiplied by the fraction determined under subparagraph (B).

“(B) DETERMINATION OF FRACTION.—For purposes of subparagraph (A), the fraction determined under this subparagraph is 1 reduced by a fraction—

“(i) the numerator of which is that portion of the basis of the property which is allocable to such financing or proceeds, and

“(ii) the denominator of which is the basis of the property.

“(C) SUBSIDIZED ENERGY FINANCING.—For purposes of subparagraph (A), the term ‘subsidized energy financing’ means financing provided under a Federal, State, or local program a principal purpose of which is to provide subsidized financing for projects designed to conserve or produce energy.

“(2) CERTAIN PROGRESS EXPENDITURE RULES MADE APPLICABLE.—Rules similar to the rules of subsections (c)(4) and (d) of section 46 (as in effect on the day before the date of the enactment of the Revenue Reconciliation Act of 1990) shall apply for purposes of this section.

“(g) Application of Section.—This section shall apply to property placed in service after December 31, 2005, and before January 1, 2011.”.

(b) Conforming amendments.—

(1) Section 48 is repealed.

(2) Section 280C is amended by adding after subsection (e) the following:

“(f) Credit for energy property expenses.—

“(1) IN GENERAL.—No deduction shall be allowed for that portion of the expenses for energy property (as defined in section 48A(c)) otherwise allowable as a deduction for the taxable year which is equal to the amount of the credit determined for such taxable year under section 48A(a).

“(2) SIMILAR RULE WHERE TAXPAYER CAPITALIZES RATHER THAN DEDUCTS EXPENSES.—If—

“(A) the amount of the credit allowable for the taxable year under section 48A (determined without regard to section 38(c)), exceeds

“(B) the amount allowable as a deduction for the taxable year for expenses for energy property (determined without regard to paragraph (1)), the amount chargeable to capital account for the taxable year for such expenses shall be reduced by the amount of such excess.

“(3) CONTROLLED GROUPS.—Paragraph (3) of subsection (b) shall apply for purposes of this subsection.”.

(3) Section 29(b)(3)(A)(i)(III) is amended by striking “section 48(a)(4)(C)” and inserting “section 48A(e)(1)(C)”.

(4) Section 50(a)(2)(E) is amended by striking “section 48(a)(5)” and inserting “section 48A(e)(2)”.

(5) Section 168(e)(3)(B) is amended—

(A) by striking clause (vi)(I) and inserting the following:

“(I) is described in paragraph (1) or (2) of section 48A(d) (or would be so described if ‘solar and wind’ were substituted for ‘solar’ in paragraph (1)(B)),”, and

(B) in the last sentence by striking “section 48(a)(3)” and inserting “section 48A(c)(2)(A)”.

(6) The table of sections for subpart E of part IV of subchapter A of chapter 1 is amended by striking the item relating to section 48 and inserting the following:


“Sec. 48A. Energy credit”.


(c) Effective date.—The amendments made by this section shall apply to property placed in service 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).

SEC. 326. Credit for energy efficient recycling or remanufacturing equipment.

(a) In general.—Section 46 (relating to amount of investment 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 reclamation credit.”.

(b) Reclamation credit.—Subpart E of part IV of subchapter A of chapter 1 is amended by inserting before section 48A, as added by this Act, the following new section:

“SEC. 48. Reclamation credit.

“(a) In general.—For purposes of section 46, the reclamation credit for any taxable year is 20 percent of the basis of each qualified reclamation property placed in service during the taxable year.

“(b) Qualified reclamation property.—

“(1) IN GENERAL.—For purposes of this section, the term ‘qualified reclamation property’ means property—

“(A) which is qualified recycling property or qualified remanufacturing property,

“(B) which is tangible property (not including a building and its structural components),

“(C) with respect to which depreciation (or amortization in lieu of depreciation) is allowable,

“(D) which has a useful life of at least 5 years, and

“(E) which is—

“(i) acquired by purchase (as defined in section 179(d)(2)) by the taxpayer if the original use of such property commences with the taxpayer, or

“(ii) constructed by or for the taxpayer.

“(2) DOLLAR LIMITATION.—

“(A) IN GENERAL.—The basis of qualified reclamation property taken into account under paragraph (1) for any taxable year shall not exceed $10,000,000 for a taxpayer.

“(B) TREATMENT OF CONTROLLED GROUP.—For purposes of clause (i)—

“(i) all component members of a controlled group shall be treated as one taxpayer, and

“(ii) the Secretary shall apportion the dollar limitation in such clause among the component members of such controlled group in such manner as he shall by regulation prescribe.

“(C) TREATMENT OF PARTNERSHIPS AND S CORPORATIONS.—In the case of a partnership, the dollar limitation in clause (i) shall apply with respect to the partnership and with respect to each partner. A similar rule shall apply in the case of an S corporation and its shareholders.

“(D) CONTROLLED GROUP DEFINED.—For purposes of clause (ii), the term ‘controlled group’ has the meaning given such term by section 1563(a), except that ‘more than 50 percent’ shall be substituted for ‘at least 80 percent’ each place it appears in section 1563(a)(1).

“(c) Certain progress expenditure rules made applicable.—Rules similar to the rules of subsections (c)(4) and (d) of section 46 (as in effect on the day before the date of the enactment of the Revenue Reconciliation Act of 1990) shall apply for purposes of this subsection.

“(d) Definitions.—For purposes of this subsection—

“(1) QUALIFIED RECYCLING PROPERTY.—The term ‘qualified recycling property’ means equipment used exclusively to collect, distribute, or sort used ferrous or nonferrous metals. The term does not include equipment used to collect, distribute, or sort precious metals such as gold, silver, or platinum unless such use is coincidental to the collection, distribution, or sorting of other used ferrous or nonferrous metals.

“(2) QUALIFIED REMANUFACTURING PROPERTY.—The term ‘qualified remanufacturing property’ means equipment used primarily by the taxpayer in the business of rebuilding or remanufacturing a used product or part, but only if—

“(A) the rebuilt or remanufactured product or part includes 50 percent or less virgin material, and

“(B) the equipment is not used primarily in a process occurring after the product or part is rebuilt or remanufactured.

“(3) COORDINATION WITH REHABILITATION AND ENERGY CREDITS.—For purposes of this section—

“(A) the basis of any qualified reclamation property 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 48A), and

“(B) expenditures taken into account under either section 47 or 48A shall not be taken into account under this section.”.

(c) Special basis adjustment rule.—Paragraph (3) of section 50(c) (relating to basis adjustment to investment credit property) is amended by inserting “or reclamation credit” after “energy credit”.

(d) Clerical amendment.—The table of sections for subpart E of part IV of subchapter A of chapter 1 is amended by inserting before the item relating to section 48A the following:


“Sec. 48. Reclamation credit”.

(e) Effective date.—The amendments made by this section shall apply to property placed in service after the date of the enactment of this Act.

SEC. 327. Credit for distributed energy generation and demand management property used in residences.

(a) In general.—Subpart A of part IV of subchapter A of chapter 1 (relating to nonrefundable personal credits) is amended by inserting after section 25B the following:

“SEC. 25C. Residential distributed energy generation and demand management 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 the sum of—

“(1) 50 percent of the qualified photovoltaic property expenditures,

“(2) 15 percent of the qualified solar water heating property expenditures,

“(3) 25 percent of the qualified wind energy property expenditures, and

“(4) 20 percent for the qualified fuel cell property expenditures,

“(5) 20 percent for qualified energy-efficient building property expenditures (10 percent for expenditures described in subsection (c)(5)(B)), made by the taxpayer during the taxable year.

“(b) Limitations.—

“(1) MAXIMUM CREDIT.—

“(A) PHOTOVOLTAIC PROPERTY.—

“(i) IN GENERAL.—The credit allowed under subsection (a)(1) shall not exceed the applicable rate multiplied by the number of watts of generating capacity of the property which does not exceed 10 kilowatts.

“(ii) APPLICABLE RATE.—For purposes of this subparagraph, the applicable rate is the rate determined under the following table:


“In the case of taxable years beginning in calendar year: The applicable rate is:
2006 $3.00
2007 $2.75
2008 $2.50
2009 and thereafter $2.25

“(iii) GENERATING CAPACITY.—For purposes of this subparagraph, generating capacity shall be measured as the rated peak power output of a system’s component modules as established by the American Society for Testing and Materials. Any photovoltaic property which is electrically contiguous or serves the same customer load shall be treated as one system for purposes of this section.

“(B) SOLAR WATER HEATING.—The credit allowed under subsection (a)(2) shall not exceed $2,000 for each system of solar energy property.

“(C) WIND.—The credit allowed under subsection (a)(3) shall not exceed $5,000 for each system of wind energy property.

“(D) ENERGY-EFFICIENT BUILDING PROPERTY.—The credit allowed under subsection (a)(5) shall not exceed $500 for each item of energy-efficient building property.

“(2) TYPE OF PROPERTY.—No expenditure may be taken into account under this section unless such expenditure is made by the taxpayer for property installed on or in connection with a dwelling unit which is located in the United States and which is used as a residence.

“(3) SAFETY CERTIFICATIONS.—No credit shall be allowed under this section for an item of property unless—

“(A) in the case of solar water heating property, such property is certified for performance and safety by the nonprofit Solar Rating Certification Corporation or a comparable entity endorsed by the government of the State in which such property is installed, and

“(B) in the case of a photovoltaic, wind energy, or fuel cell property, such property meets appropriate fire and electric code requirements.

“(c) Definitions and Special Rules relating to expenditures.—For purposes of this section—

“(1) QUALIFIED PHOTOVOLTAIC PROPERTY EXPENDITURE.—The term ‘qualified photovoltaic property expenditure’ means an expenditure for property which uses solar energy to generate electricity for use in a dwelling unit.

“(2) QUALIFIED SOLAR WATER HEATING PROPERTY EXPENDITURE.—The term ‘qualified solar water heating property expenditure’ means an expenditure for property which uses solar energy to heat water for use in a dwelling unit with respect to which a majority of the energy is derived from the sun.

“(3) QUALIFIED WIND ENERGY PROPERTY EXPENDITURE.—The term ‘qualified wind energy property expenditure’ means an expenditure for property which uses wind energy to generate electricity for use in a dwelling unit.

“(4) QUALIFIED FUEL CELL PROPERTY EXPENDITURE.—The term ‘qualified fuel cell property expenditure’ means an expenditure for property which uses an electrochemical fuel cell system to generate electricity for use in a dwelling unit.

“(5) QUALIFIED ENERGY-EFFICIENT BUILDING PROPERTY EXPENDITURE.—

“(A) IN GENERAL.—The term ‘qualified energy-efficient building property expenditure’ means an expenditure for energy efficient building property defined in clauses (ii), (iii), (iv), (v), (vi), and (vii) of section 48A(d)(3)(A).

“(B) 10 PERCENT CREDIT FOR CERTAIN PROPERTY.—For purposes of subsection (a)(5), the expenditures described in this subparagraph are expenditures for energy efficient building property defined in clauses (iii)(II) and (iv)(II) of section 48A(d)(3)(A).

“(6) 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 property described in paragraph (1) or (2) solely because it constitutes a structural component of the structure on which it is installed.

“(7) LABOR COSTS.—Expenditures for labor costs properly allocable to the onsite preparation, assembly, or original installation of the property described in paragraph (1), (2), (3), (4), or (5) and for piping or wiring to interconnect such property to the dwelling unit shall be taken into account for purposes of this section.

“(8) ENERGY STORAGE MEDIUM.—Expenditures which are properly allocable to a swimming pool, hot tub, or any other energy storage medium which has a function other than the function of such storage shall not be taken into account for purposes of this section.

“(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 shall apply:

“(A) The amount of the credit allowable under subsection (a) by reason of expenditures (as the case may be) 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 his 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 his 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) JOINT OWNERSHIP OF ITEMS OF SOLAR OR WIND ENERGY PROPERTY.—

“(A) IN GENERAL.—Any expenditure otherwise qualifying as an expenditure described in paragraph (1), (2), or (3) of subsection (c) shall not be treated as failing to so qualify merely because such expenditure was made with respect to 2 or more dwelling units.

“(B) LIMITS APPLIED SEPARATELY.—In the case of any expenditure described in subparagraph (A), the amount of the credit allowable under subsection (a) shall (subject to paragraph (1)) be computed separately with respect to the amount of the expenditure made for each dwelling unit.

“(5) ALLOCATION IN CERTAIN CASES.—If less than 80 percent of the use of an item is for nonbusiness residential purposes, only that portion of the expenditures for such item which is properly allocable to use for nonbusiness residential purposes shall be taken into account. For purposes of this paragraph, use for a swimming pool shall be treated as use which is not for residential purposes.

“(6) 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.

“(7) REDUCTION OF CREDIT FOR GRANTS, TAX-EXEMPT BONDS, AND SUBSIDIZED ENERGY FINANCING.—The rules of section 29(b)(3) shall apply for purposes of this section.

“(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, 2009.”.

(b) Conforming amendments.—

(1) Section 1016(a) is amended by striking “and” at the end of paragraph (34), by striking the period at the end of paragraph (35) and inserting “; and”, and by adding at the end the following:

“(36) 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.”.

(2) The table of sections for subpart A of part IV of subchapter A of chapter 1 is amended by inserting after the item relating to section 25B the following:


“Sec. 25C. Residential solar, wind, and fuel cell energy property”.


(c) Effective date.—The amendments made by this section shall apply to expenditures made after the date of the enactment of this Act, in taxable years ending after such date.

SEC. 328. Credit for energy management systems using residential real time metering systems.

(a) Credit for energy management systems.—

(1) IN GENERAL.—Subpart B of part IV of subchapter A of chapter 1 (relating to foreign tax credits, etc.) is amended by inserting after section 30C the following new section:

“SEC. 30D. Credit for energy management systems.

“(a) Allowance of credit.—There shall be allowed as a credit against the tax imposed by this chapter for the taxable year—

“(1) an amount equal to $20 for each qualified energy management device originally placed in service during the taxable year, and

“(2) for each qualified retrofitted meter originally placed in service during the taxable year, an amount equal to the lesser of—

“(A) $20, or

“(B) the adjusted basis of such meter.

“(b) Definitions.—

“(1) QUALIFIED ENERGY MANAGEMENT DEVICE.—For purposes of this section, the term ‘qualified energy management device’ means any meter or metering device acquired and used by an electric energy or natural gas supplier or service provider to enable consumers or others to manage their purchase, sale, or use of electricity or natural gas in response to energy price and usage signals.

“(2) QUALIFIED RETROFITTED METER.—For purposes of this section, the term ‘qualified retrofitted meter’ means an electric energy or natural gas meter or metering device that has been modified by the addition of equipment designed to enable users to manage the purchase, sale, or use of electricity and natural gas in response to energy price and usage signals.

“(3) PLACED IN SERVICE.—For purposes of this section, the term ‘placed in service’ means interconnected with other devices in a manner that permits reading of energy price and usage signals on at least a daily basis.

“(4) COST OF METERS INCLUDES COST OF INSTALLATION.—The cost of any qualified energy management device or qualified retrofitted meter referred to in paragraph (1) or (2) shall include the cost of the original installation of such property.

“(c) Special Rules.—

“(1) BASIS REDUCTION.—The basis of any property for which a credit is allowed under subsection (a) shall be reduced by the amount of such credit.

“(2) RECAPTURE.—The Secretary shall, by regulations, provide for recapturing the benefit of any credit allowable under subsection (a) with respect to any property that ceases to be property eligible for such credit.

“(3) PROPERTY USED OUTSIDE THE UNITED STATES, ETC., NOT QUALIFIED.—No credit shall be allowed under subsection (a) with respect to any property referred to in section 50(b)(1) or with respect to the portion of the cost of any property taken into account under section 179.

“(4) ELECTION TO NOT TAKE CREDIT.—No credit shall be allowed under subsection (a) for any energy management device if the taxpayer elects to not have this section apply to such device.

“(5) CREDITS FOR CERTAIN TAX EXEMPT ORGANIZATIONS AND GOVERNMENTAL UNITS.—

“(A) ALLOWANCE OF CREDIT.—Any credit which would be allowable under subsection (a) with respect to a qualified energy management device or a qualified retrofitted meter placed in service by an entity if such entity were not exempt from tax under this chapter shall be treated as a credit allowable under subpart B to such entity if such entity 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) an entity the income of which is excludable from gross income under section 115, or

“(iv) a State, the District of Columbia, any territory or possession of the United States, or any political subdivision thereof.

“(B) USE OF CREDIT.—

“(i) TRANSFER OF CREDIT.—An entity described in subparagraph (A) may assign, trade, sell, or otherwise transfer any credit allowable to such entity under subparagraph (A) to any taxpayer.

“(ii) USE OF CREDIT AS AN OFFSET.—Notwithstanding any other provision of law, in the case of an entity described in clause (i) or (ii) of subparagraph (A), any credit allowable to such entity under subparagraph (A) may be applied by such entity, without penalty, 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.).

“(C) CREDIT NOT INCOME.—Neither a transfer under clause (i) nor a use under clause (ii) of subparagraph (B) of any credit allowable under subparagraph (A) shall result in income for purposes of section 501(c)(12).

“(D) TRANSFER PROCEEDS TREATED AS ARISING FROM ESSENTIAL GOVERNMENT FUNCTION.—Any proceeds derived by an entity described in subparagraph (A)(iii) from the transfer of any credit under subparagraph (B)(i) shall be treated as arising from an essential government function.

“(d) Termination.—This section shall not apply to any property placed in service after December 31, 2012.”.

(2) INCLUSION OF INDIAN TRIBAL GOVERNMENTS.—Section 7871(a)(7) is amended by striking “and” at the end of subparagraph (B), by striking the period at the end of subparagraph (C), and by adding at the end the following:

“(D) section 30D (relating to credit for energy management systems).”.

(3) CONFORMING AMENDMENTS.—

(A) The table of contents for subpart B of part IV of subchapter A of chapter 1 is amended by inserting after the item relating to section 30C the following new item:


“Sec. 30D. Credit for energy management systems”.

(B) Section 1016(a) is amended by striking “and” at the end of paragraph (35), by striking the period at the end of paragraph (36) and inserting “, and”, and by adding at the end the following new paragraph:

“(37) to the extent provided in section 30D(c)(1).”.

(4) EFFECTIVE DATE.—The amendments made by this subsection shall apply to qualified energy management devices placed in service after the date of the enactment of this Act and to qualified retrofitted meters that are placed in service on or after, or that are in use as of, January 1, 2006.

(b) 5–Year applicable recovery period for depreciation of Qualified energy management devices.—

(1) IN GENERAL.—Subparagraph (B) of section 168(e)(3) (relating to classification of property) is amended by striking “and” at the end of clause (v), by striking the period at the end of clause (vi) and inserting “, and”, and by adding at the end the following new clause:

“(vii) any qualified energy management device.”.

(2) DEFINITION OF QUALIFIED ENERGY MANAGEMENT DEVICE.—Section 168(i) (relating to definitions and special rules) is amended by inserting at the end the following new paragraph:

“(17) QUALIFIED ENERGY MANAGEMENT DEVICE.—The term ‘qualified energy management device’ means a meter or metering device that is acquired and used by an electric energy or natural gas supplier or service provider to enable consumers and others to manage their purchase, sale, and use of electricity or natural gas in response to energy price and usage signals that are readable on at least a daily basis. For purposes of the preceding sentence, the cost of any qualified energy management device shall (at the election of the taxpayer) include the cost of the original installation of such property.”.

(3) EFFECTIVE DATE.—The amendments made by this subsection shall apply to property placed in service after December 31, 2005, and before January 1, 2012.

SEC. 329. Credit for flywheel property.

(a) In general.—Subpart B of part IV of subchapter A of chapter 1 (relating to foreign tax credits, etc.) is amended by inserting after section 30D the following new section:

“SEC. 30E. Credit for flywheel property.

“(a) Allowance of credit.—There shall be allowed as a credit against the tax imposed by this chapter for the taxable year an amount equal to 10 percent of the cost of any qualified flywheel property placed in service by the taxpayer during the taxable year.

“(b) Limitation.—The credit allowed under subsection (a) shall not exceed $2,000 for a taxable year.

“(c) Qualified flywheel property.—For purposes of this section, the term ‘qualified flywheel property’ means a flywheel designed exclusively to store energy that is used to generate electricity.

“(d) Special Rules.—

“(1) BASIS REDUCTION.—The basis of any property for which a credit is allowable under subsection (a) shall be reduced by the amount of such credit.

“(2) RECAPTURE.—The Secretary shall, by regulations, provide for recapturing the benefit of any credit allowable under subsection (a) with respect to any property that ceases to be property eligible for such credit.

“(3) PROPERTY USED OUTSIDE THE UNITED STATES, ETC., NOT QUALIFIED.—No credit shall be allowed under subsection (a) with respect to any property referred to in section 50(b)(1) or with respect to the portion of the cost of any property taken into account under section 179.

“(4) ELECTION TO NOT TAKE CREDIT.—No credit shall be allowed under subsection (a) for any qualified flywheel property if the taxpayer elects to not have this section apply to such property.

“(d) Termination.—This section shall not apply to any property placed in service after December 31, 2009.”.

(b) Conforming amendments.—

(1) The table of contents for subpart B of part IV of subchapter A of chapter 1 is amended by inserting after the item relating to section 30D the following new item:


“Sec. 30E. Credit for qualified flywheel property”.


(2) Section 1016(a) 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(c)(1).”.

(c) Effective date.—The amendments made by this section shall apply to property placed in service in taxable years ending after the date of the enactment of this Act.

SEC. 330. Credits for clean coal.

(a) Allowance of qualifying clean coal technology unit credit.—

(1) IN GENERAL.—Section 46 (relating to amount of credit), as amended by this Act, is amended by striking “and” at the end of paragraph (2), by striking the period at the end of paragraph (3) and inserting “, and”, and by adding at the end the following:

“(4) the qualifying clean coal technology unit credit.”.

(2) AMOUNT OF QUALIFYING CLEAN COAL TECHNOLOGY UNIT 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 48A the following:

“SEC. 48B. Qualifying clean coal technology unit credit.

“(a) In general.—For purposes of section 46, the qualifying clean coal technology unit credit for any taxable year is an amount equal to 10 percent of the qualified investment in a qualifying system of continuous emission control for such taxable year.

“(b) Qualifying system of continuous emission control.—

“(1) IN GENERAL.—For purposes of subsection (a), the term ‘qualifying system of continuous emission control’ means a system of the taxpayer which—

“(A) serves, is added to, or retrofits an existing coal-based electricity generation unit, the construction, installation, or retrofitting of which is completed by the taxpayer (but only with respect to that portion of the basis which is properly attributable to such construction, installation, or retrofitting),

“(B) removes or reduces—

“(i) 90 percent or more of carbon dioxide emissions, or

“(ii) any pollutant subject to the requirements of section 109 of the Clean Air Act or any hazardous pollutant listed under section 112(b) of such Act, to a greater extent than is required under such Act,

“(C) is depreciable under section 167,

“(D) has a useful life of not less than 4 years, and

“(E) is located in the United States.

“(2) SPECIAL RULE FOR SALE-LEASEBACKS.—For purposes of subparagraph (A) of paragraph (1), in the case of a unit which—

“(A) is originally placed in service by a person, and

“(B) is sold and leased back by such person, or is leased to such person, within 3 months after the date such unit was originally placed in service, for a period of not less than 12 years, such unit shall be treated as originally placed in service not earlier than the date on which such property is used under the leaseback (or lease) referred to in subparagraph (B). The preceding sentence shall not apply to any property if the lessee and lessor of such property make an election under this sentence. Such an election, once made, may be revoked only with the consent of the Secretary.

“(c) Existing coal-based electricity generation unit.—For purposes of subsection (a), the term ‘existing coal-based electricity generating unit’ means, with respect to any taxable year, a steam generator-turbine unit which uses coal to produce 75 percent or more of its output as electricity and was in operation before the effective date of this section.

“(d) Limit on qualifying clean coal technology unit credit.—For purposes of subsection (a), the credit shall be applicable to not more than the first $100,000,000 of qualifying investment in a qualifying system of continuous emission control at any 1 existing coal-based electricity generating unit.

“(e) Qualified investment.—For purposes of subsection (a), the term ‘qualified investment’ means, with respect to any taxable year, the basis of a qualifying system of continuous emission control placed in service by the taxpayer during such taxable year.

“(f) 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 (e) 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 system of continuous emission control 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 QUALIFYING SYSTEM OF CONTINUOUS EMISSION CONTROL 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.

“(g) 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 48A is allowed unless the taxpayer elects to waive the application of such credit to such property.

“(h) Termination.—This section shall not apply with respect to any qualified investment made more than 10 years after the effective date of this section.”.

(3) RECAPTURE.—Section 50(a) (relating to other special rules) is amended by adding at the end the following:

“(6) SPECIAL RULES RELATING TO QUALIFYING SYSTEM OF CONTINUOUS EMISSION CONTROL.—For purposes of applying this subsection in the case of any credit allowable by reason of section 48B, 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 system of continuous emission control (as defined by section 48B(b)(1)) multiplied by a fraction whose numerator is the number of years remaining to fully depreciate under this title the qualifying system of continuous emission control disposed of, and whose denominator is the total number of years over which such unit would otherwise have been subject to depreciation. For purposes of the preceding sentence, the year of disposition of the qualifying system of continuous emission control property 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 system of continuous emission control under section 48B, except that the amount of the increase in tax under subparagraph (A) of this paragraph shall be substituted in lieu of 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 system of continuous emission control.”.

(4) TECHNICAL AMENDMENTS.—

(A) Section 49(a)(1)(C) is amended by striking “and” at the end of clause (ii), by striking the period at the end of clause (iii) and inserting “, and”, and by adding at the end the following:

“(iv) the portion of the basis of any qualifying system of continuous emission control attributable to any qualified investment (as defined by section 48B(e)).”.

(B) Section 50(a)(4) is amended by striking “and (2)” and inserting “, (2), and (6)”.

(C) Section 50(c) is amended by adding at the end the following:

“(6) NONAPPLICATION.—Paragraphs (1) and (2) shall not apply to any qualifying clean coal technology unit credit under section 48B.”.

(D) The table of sections for subpart E of part IV of subchapter A of chapter 1 is amended by inserting after the item relating to section 48A the following:


“Sec. 48B. Qualifying clean coal technology unit credit”.

(5) EFFECTIVE DATE.—The amendments made by this subsection 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 enactment of the Revenue Reconciliation Act of 1990).

(b) Credit for production from a qualifying clean coal technology unit.—

(1) IN GENERAL.—Subpart D of part IV of subchapter A of chapter 1 (relating to business related credits) is amended by adding at the end the following:

“SEC. 45L. Credit for production from a qualifying clean coal technology unit.

“(a) General rule.—For purposes of section 38, the qualifying clean coal technology production credit of any taxpayer for any taxable year is equal to the product of—

“(1) the applicable amount of clean coal technology production credit, multiplied by

“(2) the kilowatt hours of electricity produced by the taxpayer during such taxable year at a qualifying clean coal technology unit during the 10-year period beginning on the date the unit was returned to service after retrofit, repowering, or replacement.

“(b) Applicable Amount.

“(1) IN GENERAL.—For purposes of this section, the applicable amount of clean coal technology production credit is equal to $0.0034.

“(2) INFLATION ADJUSTMENT FACTOR.—For calendar years after 2005, the applicable amount of clean coal technology production credit shall be adjusted by multiplying such amount by the inflation adjustment factor for the calendar year in which the amount is applied. If any amount as increased under the preceding sentence is not a multiple of 0.01 cent, such amount shall be rounded to the nearest multiple of 0.01 cent.

“(c) Definitions and Special Rules.—For purposes of this section—

“(1) QUALIFYING CLEAN COAL TECHNOLOGY UNIT.—The term ‘qualifying clean coal technology unit’ means a unit of the taxpayer which—

“(A) is an existing coal-based electricity generating steam generator-turbine unit,

“(B) has a nameplate capacity rating of not more than 300,000 kilowatts, and

“(C) has been retrofitted, repowered, or replaced with a clean coal technology within 10 years of the effective date of this section.

“(2) CLEAN COAL TECHNOLOGY.—The term ‘clean coal technology’ means technology which—

“(A) uses coal to produce 50 percent or more of its thermal output as electricity, including advanced pulverized coal or atmospheric fluidized bed combustion, pressurized fluidized bed combustion, integrated gasification combined cycle, or any other technology for the production of electricity,

“(B) has a design heat rate not less than 500 Btu/kWh below that of the existing unit before it is retrofit, repowered, or replaced with the qualifying clean coal technology,

“(C) has a maximum design heat rate of not more than 9,000 Btu/kWh when the design coal has a heat content of more than 8,000 Btu per pound, and

“(D) has a maximum design heat rate of not more than 10,500 Btu/kWh when the design coal has a heat content of 8,000 Btu per pound or less.

“(3) APPLICATION OF CERTAIN RULES.—The rules of paragraphs (3), (4), and (5) of section 45(e) shall apply.

“(4) INFLATION ADJUSTMENT FACTOR.—The term ‘inflation adjustment factor’ means, with respect to a calendar year, a fraction the numerator of which is the GDP implicit price deflator for the preceding calendar year and the denominator of which is the GDP implicit price deflator for the calendar year 2005.

“(5) GDP IMPLICIT PRICE DEFLATOR.—The term ‘GDP implicit price deflator’ means the most recent revision of the implicit price deflator for the gross domestic product as computed by the Department of Commerce before March 15 of the calendar year.

“(d) Coordination with other credits.—This section shall not apply to any property with respect to which the qualifying clean coal technology unit credit under section 48A is allowed unless the taxpayer elects to waive the application of such credit to such property.”.

(2) CREDIT TREATED AS BUSINESS CREDIT.—Section 38(b) is amended by striking “plus” at the end of paragraph (21), by striking the period at the end of paragraph (22) and inserting “, plus”, and by adding at the end the following:

“(23) the qualifying clean coal technology production credit determined under section 45L(a).”.

(3) CLERICAL AMENDMENT.—The table of sections for subpart D of part IV of subchapter A of chapter 1 is amended after the item relating to section 45K the following:


“Sec. 45L. Credit for production from a qualifying clean coal technology unit”.

(4) EFFECTIVE DATE.—The amendments made by this subsection shall apply to production after the date of enactment of this Act.

(c) Credit for investment in qualifying advanced clean coal technology.—

(1) ALLOWANCE OF QUALIFYING ADVANCED CLEAN COAL TECHNOLOGY FACILITY CREDIT.—Section 46 (relating to amount of credit) is amended by striking “and” at the end of paragraph (3), by striking the period at the end of paragraph (4) and inserting “, and”, and by adding at the end the following:

“(5) the qualifying advanced clean coal technology facility credit.”.

(2) AMOUNT OF QUALIFYING ADVANCED CLEAN COAL 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 48B the following:

“SEC. 48C. Qualifying advanced clean coal technology facility credit.

“(a) In general.—For purposes of section 46, the qualifying advanced clean coal technology facility credit for any taxable year is an amount equal to 10 percent of the qualified investment in a qualifying advanced clean coal technology facility for such taxable year.

“(b) Qualifying advanced clean coal technology facility.—

“(1) IN GENERAL.—For purposes of subsection (a), the term ‘qualifying advanced clean coal technology facility’ means a facility of the taxpayer which—

“(A)(i)(I) replaces a conventional technology facility of the taxpayer and the original use of which commences with the taxpayer, or

“(II) is a retrofitted or repowered conventional technology facility, the retrofitting or repowering of which is completed by the taxpayer (but only with respect to that portion of the basis which is properly attributable to such retrofitting or repowering), or

“(ii) is acquired through purchase (as defined by section 179(d)(2)),

“(B) is depreciable under section 167,

“(C) has a useful life of not less than 4 years,

“(D) is located in the United States, and

“(E) uses qualifying advanced clean coal technology.

“(2) SPECIAL RULE FOR SALE-LEASEBACKS.—For purposes of subparagraph (A) of paragraph (1), in the case of a facility which—

“(A) is originally placed in service by a person, and

“(B) is sold and leased back by such person, or is leased to such person, within 3 months after the date such facility was originally placed in service, for a period of not less than 12 years, such facility shall be treated as originally placed in service not earlier than the date on which such property is used under the leaseback (or lease) referred to in subparagraph (B). The preceding sentence shall not apply to any property if the lessee and lessor of such property make an election under this sentence. Such an election, once made, may be revoked only with the consent of the Secretary.

“(3) QUALIFYING ADVANCED CLEAN COAL TECHNOLOGY.—For purposes of paragraph (1)—

“(A) IN GENERAL.—The term ‘qualifying advanced clean coal technology’ means, with respect to clean coal technology—

“(i) multiple applications, with a combined capacity of not more than 5,000 megawatts, of advanced pulverized coal or atmospheric fluidized bed combustion technology—

“(I) installed as a new, retrofit, or repowering application,

“(II) operated between 2006 and 2015, and

“(III) with a design net heat rate of not more than 9,500 Btu per kilowatt hour when the design coal has a heat content of more than 8,000 Btu per pound, or a design net heat rate of not more than 9,900 Btu per kilowatt hour when the design coal has a heat content of 8,000 Btu per pound or less,

“(ii) multiple applications, with a combined capacity of not more than 1,000 megawatts, of pressurized fluidized bed combustion technology—

“(I) installed as a new, retrofit, or repowering application,

“(II) operated between 2006 and 2015, and

“(III) with a design net heat rate of not more than 8,400 Btu per kilowatt hour when the design coal has a heat content of more than 8,000 Btu per pound, or a design net heat rate of not more than 9,900 Btu’s per kilowatt hour when the design coal has a heat content of 8,000 Btu per pound or less,

“(iii) multiple applications, with a combined capacity of not more than 2,000 megawatts, of integrated gasification combined cycle technology, with or without fuel or chemical co-production—

“(I) installed as a new, retrofit, or repowering application,

“(II) operated between 2006 and 2015,

“(III) with a design net heat rate of not more than 8,550 Btu per kilowatt hour when the design coal has a heat content of more than 8,000 Btu per pound, or a design net heat rate of not more than 9,900 Btu per kilowatt hour when the design coal has a heat content of 8,000 Btu per pound or less, and

“(IV) with a net thermal efficiency on any fuel or chemical co-production of not less than 39 percent (higher heating value), and

“(iv) multiple applications, with a combined capacity of not more than 2,000 megawatts of technology for the production of electricity—

“(I) installed as a new, retrofit, or repowering application,

“(II) operated between 2006 and 2015, and

“(III) with a carbon emission rate which is not more than 85 percent of conventional technology.

“(B) EXCEPTIONS.—Such term shall not include clean coal technology projects receiving or scheduled to receive funding under the Clean Coal Technology Program of the Department of Energy.

“(C) CLEAN COAL TECHNOLOGY.—The term ‘clean coal technology’ means advanced technology which uses coal to produce 75 percent or more of its thermal output as electricity including advanced pulverized coal or atmospheric fluidized bed combustion, pressurized fluidized bed combustion, integrated gasification combined cycle with or without fuel or chemical co-production, and any other technology for the production of electricity which exceeds the performance of conventional technology.

“(D) CONVENTIONAL TECHNOLOGY.—The term ‘conventional technology’ means—

“(i) coal-fired combustion technology with a design net heat rate of not less than 9,500 Btu per kilowatt hour (HHV) and a carbon equivalents emission rate of not more than 0.54 pounds of carbon per kilowatt hour when the design coal has a heat content of more than 8,000 Btu per pound,

“(ii) coal-fired combustion technology with a design net heat rate of not less than 10,500 Btu per kilowatt hour (HHV) and a carbon equivalents emission rate of not more than 0.60 pounds of carbon per kilowatt hour when the design coal has a heat content of 8,000 Btu per pound or less, or

“(iii) natural gas-fired combustion technology with a design net heat rate of not less than 7,500 Btu per kilowatt hour (HHV) and a carbon equivalents emission rate of not more than 0.24 pounds of carbon per kilowatt hour.

“(E) DESIGN NET HEAT RATE.—The design net heat rate shall be based on the design annual heat input to and the design annual net electrical output from the qualifying advanced clean coal technology (determined without regard to such technology’s co-generation of steam).

“(F) SELECTION CRITERIA.—Selection criteria for clean coal technology facilities—

“(i) shall be established by the Secretary of Energy as part of a competitive solicitation,

“(ii) shall include primary criteria of minimum design net heat rate, maximum design thermal efficiency, and lowest cost to the government, and

“(iii) shall include supplemental criteria as determined appropriate by the Secretary of Energy.

“(c) Qualified investment.—For purposes of subsection (a), the term ‘qualified investment’ means, with respect to any taxable year, the basis of a qualifying advanced clean coal technology facility placed in service by the taxpayer during such taxable year.

“(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 (c) without regard to this section) 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 advanced clean coal 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 QUALIFYING ADVANCED CLEAN COAL 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 48A is allowed unless the taxpayer elects to waive the application of such credit to such property.

“(f) Termination.—This section shall not apply with respect to any qualified investment made more than 10 years after the effective date of this section.”.

(3) RECAPTURE.—Section 50(a) (relating to other special rules) is amended by inserting after paragraph (6) the following:

“(7) SPECIAL RULES RELATING TO QUALIFYING ADVANCED CLEAN COAL TECHNOLOGY FACILITY.—For purposes of applying this subsection in the case of any credit allowable by reason of section 48C, 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 advanced clean coal technology facility (as defined by section 48C(b)(1)) multiplied by a fraction whose numerator is the number of years remaining to fully depreciate under this title the qualifying advanced clean coal 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 advanced clean coal technology facility property 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 advanced clean coal technology facility under section 48C, except that the amount of the increase in tax under subparagraph (A) of this paragraph shall be substituted in lieu of 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 advanced clean coal technology facility.”.

(4) TECHNICAL AMENDMENTS.—

(A) Section 49(a)(1)(C) is amended by striking “and” at the end of clause (iii), by striking the period at the end of clause (iv) and inserting “, and”, and by adding at the end the following:

“(v) the portion of the basis of any qualifying advanced clean coal technology facility attributable to any qualified investment (as defined by section 48C(c)).”.

(B) Section 50(a)(4) of such Code is amended by striking “and (6)” and inserting “(6), and (7)”.

(C) Section 50(c)(6) of such Code, as added by section 201(e)(3), is amended by inserting “or any advanced clean coal technology facility credit under section 48C” after “section 48B”.

(D) The table of sections for subpart E of part IV of subchapter A of chapter 1 is amended by inserting after the item relating to section 48B the following:


“Sec. 48C. Qualifying advanced clean coal technology facility credit”.

(5) EFFECTIVE DATE.—The amendments made by this subsection 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 enactment of the Revenue Reconciliation Act of 1990).

(d) Credit for production from qualifying advanced clean coal technology.—

(1) IN GENERAL.—Subpart D of part IV of subchapter A of chapter 1 (relating to business related credits) is amended by inserting after section 45L the following:

“SEC. 45M. Credit for production from qualifying advanced clean coal technology.

“(a) General rule.—For purposes of section 38, the qualifying advanced clean coal technology production credit of any taxpayer for any taxable year is equal to—

“(1) the applicable amount of advanced clean coal technology production credit, multiplied by

“(2) the sum of—

“(A) the kilowatt hours of electricity, plus

“(B) each 3,413 Btu of fuels or chemicals, produced by the taxpayer during such taxable year at a qualifying advanced clean coal technology facility during the 10-year period beginning on the date the facility was originally placed in service.

“(b) Applicable Amount.—For purposes of this section, the applicable amount of advanced clean coal technology production credit with respect to production from a qualifying advanced clean coal technology facility shall be determined as follows:

“(1) Where the design coal has a heat content of more than 8,000 Btu per pound:

“(A) In the case of a facility originally placed in service before 2008, if—


“The facility design net heat rate, Btu/kWh (HHV) is: The applicable amount is:
For 1st 5 years of such service For 2d 5 years of such service
Not more than 8,400 $.0050 $.0030 
More than 8,400 but not more than 8,550 $.0010 $.0010 
More than 8,550 but less than 8,750 $.0005 $.0005.

“(B) In the case of a facility originally placed in service after 2007 and before 2012, if—


“The facility design net heat rate, Btu/kWh (HHV) is: The applicable amount is:
For 1st 5 years of such service For 2d 5 years of such service
Not more than 7,770 $.0090 $.0075 
More than 7,770 but not more than 8,125 $.0070 $.0050 
More than 8,125 but not more than 8,350 $.0060 $.0040.

“(C) In the case of a facility originally placed in service after 2011 and before 2015, if—


“The facility design net heat rate, Btu/kWh (HHV) is: The applicable amount is:
For 1st 5 years of such service For 2d 5 years of such service
Not more than 7,380 $.0120 $.0090 
More than 7,380 but not more than 7,720 $.0095 $.0070.

“(2) Where the design coal has a heat content of not more than 8,000 Btu per pound:

“(A) In the case of a facility originally placed in service before 2008, if—


“The facility design net thermal efficiency (HHV) is: The applicable amount is:
For 1st 5 years of such service For 2d 5 years of such service
Not more than 8,500 $.0050 $.0030 
More than 8,500 but not more than 8,650 $.0010 $.0010 
More than 8,650 but not more than 8,750 $.0005 $.0005.

“(B) In the case of a facility originally placed in service after 2007 and before 2012, if—


“The facility design net heat rate, Btu/kWh (HHV) is: The applicable amount is:
For 1st 5 years of such service For 2d 5 years of such service
Not more than 8,000 $.0090 $.0075 
More than 8,000 but not more than 8,250 $.0070 $.0050 
More than 8,250 but not more than 8,400 $.0060 $.0040.

“(C) In the case of a facility originally placed in service after 2011 and before 2015, if—


The facility design net heat rate, Btu/kWh (HHV) is: The applicable amount is:
For 1st 5 years of such service For 2d 5 years of such service
Not more than 7,800 $.0120 $.0090 
More than 7,800 but not more than 7,950 $.0095 $.0070.

“(3) Where the clean coal technology facility is producing fuel or chemicals:

“(A) In the case of a facility originally placed in service before 2008, if—


“The facility design net thermal efficiency (HHV) is: The applicable amount is:
For 1st 5 years of such service For 2d 5 years of such service
Not less than 40.6 percent $.0050 $.0030 
Less than 40.6 but not less than 40 percent $.0010 $.0010 
Less than 40 but not less than 39 percent $.0005 $.0005.

“(B) In the case of a facility originally placed in service after 2007 and before 2012, if—


“The facility design net thermal efficiency (HHV) is: The applicable amount is:
For 1st 5 years of such service For 2d 5 years of such service
Not less than 43.9 percent $.0090 $.0075 
Less than 43.9 but not less than 42 percent $.0070 $.0050 
Less than 42 but not less than 40.9 percent $.0060 $.0040.

“(C) In the case of a facility originally placed in service after 2011 and before 2015, if—


“The facility design net thermal efficiency (HHV) is: The applicable amount is:
For 1st 5 years of such service For 2d 5 years of such service
Not less than 44.2 percent $.0120 $.0090 
Less than 44.2 but not less than 43.6 percent $.0095 $.0070 

“(c) Inflation adjustment factor.—For calendar years after 2005, each amount in paragraphs (1), (2), and (3) shall be adjusted by multiplying such amount by the inflation adjustment factor for the calendar year in which the amount is applied. If any amount as increased under the preceding sentence is not a multiple of 0.01 cent, such amount shall be rounded to the nearest multiple of 0.01 cent.

“(d) Definitions and Special Rules.—For purposes of this section—

“(1) IN GENERAL.—Any term used in this section which is also used in section 48B shall have the meaning given such term in section 48B.

“(2) APPLICABLE RULES.—The rules of paragraphs (3), (4), and (5) of section 45(e) shall apply.

“(3) INFLATION ADJUSTMENT FACTOR.—The term ‘inflation adjustment factor’ means, with respect to a calendar year, a fraction the numerator of which is the GDP implicit price deflator for the preceding calendar year and the denominator of which is the GDP implicit price deflator for the calendar year 2005.

“(4) GDP IMPLICIT PRICE DEFLATOR.—The term ‘GDP implicit price deflator’ means the most recent revision of the implicit price deflator for the gross domestic product as computed by the Department of Commerce before March 15 of the calendar year.”.

(2) CREDIT TREATED AS BUSINESS CREDIT.—Section 38(b) is amended by striking “plus” at the end of paragraph (22), by striking the period at the end of paragraph (23) and inserting “, plus”, and by adding at the end the following:

“(24) the qualifying advanced clean coal technology production credit determined under section 45M(a).”.

(3) CLERICAL AMENDMENT.—The table of sections for subpart D of part IV of subchapter A of chapter 1 is amended by inserting after the item relating to section 45I the following:


“Sec. 45M. Credit for production from qualifying advanced clean coal technology”.

(4) EFFECTIVE DATE.—The amendments made by this subsection shall apply to production after the date of enactment of this Act.

SEC. 331. Tax incentives for retooling and investment in new facilities and assets to produce energy efficiency technologies and domestic clean energy production technologies.

(a) Research credit.—Section 41 (relating to credit for increasing research activities) is amended by adding at the end the following new subsection:

“(i) Certain technologies.—

“(1) INCREASED CREDIT AMOUNT.—In the case of expenses relating to a technology described in paragraph (2), subsection (a)(1) shall be applied by substituting ‘40 percent’ for ‘20 percent’.

“(2) TECHNOLOGY DESCRIBED.—A technology described in this paragraph is—

“(A) a facility modified to use closed-loop biomass to co-fire with coal (within the meaning of section 45(d)(2)(A)(ii)),

“(B) a facility which uses qualified clean energy resources (as defined in section 45(c)(1)),

“(C) a technology which enables a vehicle to qualify for the alternative motor vehicle credit under section 30B, as determined by the secretary, and which is—

“(i) a fuel cell described in section 30B(b)(3),

“(ii) a hybrid motor vehicle technology described in paragraphs (2) or (3) of section 30B(c),

“(iii) an alternative fuel motor vehicle described in section 30B(d)(4), or

“(iv) an advanced diesel motor vehicle described in section 30B(e),

“(D) a qualified energy efficient appliance (as defined by section 45K(d)),

“(E) energy property described in section 48A(c),

“(F) property, expenditures for which a credit is allowed under section 25C,

“(G) qualified energy management device or qualified retrofitted meter (as defined by section 30D(b)),

“(H) qualified flywheel property (as defined by section 30E(c)), and

“(I) new electricity transmission lines designed and built primarily to transmit electricity from rural renewable energy resources which do not currently have access to such transmission lines.

“(3) DOMESTIC PRODUCTION REQUIREMENT.—An expense shall be treated as not described in paragraph (1) unless any research qualified under this section is conducted substantially within the United States.

“(4) TECHNOLOGY PORTION OF CREDIT REFUNDABLE FOR SMALL BUSINESSES.—

“(A) IN GENERAL.—In the case of an eligible small business, the portion of the credit which is attributable to expenses relating to technologies described in paragraph (2) and which would (but for subparagraph (B)) be allowable under this section shall be treated for purposes of this title as a credit allowed under subpart C.

“(B) NO DOUBLE BENEFIT.—The amount of the credit allowed under this section shall be reduced by the amount of any credit treated as allowed under subpart C by reason of subparagraph (A).

“(C) ELIGIBLE SMALL BUSINESS.—For purposes of this paragraph, a taxpayer is an eligible small business for any taxable year if the average annual gross receipts of the taxpayer for the 3 preceding taxable years do not exceed $5,000,000. For purposes of the preceding sentence, rules similar to the rules of paragraphs (2) and (3) of section 448(c) shall apply.”.

(b) Investment tax credit for equipment, structures, and all assets involved in production of qualified technologies.—

(1) IN GENERAL.—Section 46 (relating to amount of investment credit) is amended by striking “and” at the end of paragraph (4), by striking the period at the end of paragraph (5) and inserting “; and”, and by adding at the end the following new paragraph:

“(6) the qualified technology credit.”.

(2) QUALIFIED TECHNOLOGY 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 48C the following:

“SEC. 48D. Qualified technology credit.

“(a) In general.—For purposes of section 46, the qualified technology credit for any taxable year is 35 percent of the basis of each facility placed in service in the United States during such taxable year which is primarily used in the production or manufacture of technology property described in section 41(i)(2).

“(b) Certain progress expenditure rules made applicable.—Rules similar to the rules of subsections (c)(4) and (d) of section 46 (as in effect on the day before the date of the enactment of the Revenue Reconciliation Act of 1990) shall apply for purposes of this section.”.

(3) SPECIAL BASIS ADJUSTMENT RULE.—Paragraph (3) of section 50(c) (relating to basis adjustment to investment credit property) is amended by striking “or reclamation credit” and inserting “, reclamation credit, or qualified technology credit”.

(4) CLERICAL AMENDMENT.—The table of sections for subpart E of part IV of subchapter A of chapter 1 is amended by inserting after the item relating to section 48C the following new item:


“Sec. 48D. Qualified technology credit”.

(5) EFFECTIVE DATE.—The amendments made by this subsection shall apply to property placed in service after the date of enactment of this Act.

(c) Accelerated depreciation.—Section 168 (relating to accelerated cost recovery system) is amended by adding at the end the following new subsection:

“(l) Certain technologies.—

“(1) INCREASED ADDITIONAL ALLOWANCE.—In the case of any property located in the United States which is primarily used in the production or manufacture of technology property described in section 41(i)(2)—

“(A) the depreciation deduction provided by section 167(a) for the taxable year in which such property is placed in service shall include an allowance equal to the applicable percentage of the adjusted basis of such property; and

“(B) the adjusted basis of such property shall be reduced by the amount of such deduction before computing the amount otherwise allowable as a depreciation deduction under this chapter for such taxable year and any subsequent taxable year.

“(2) APPLICABLE PERCENTAGE.—For purposes of paragraph (1), the term ‘applicable percentage’ means—

“(A) 70 percent for taxable years beginning in 2005, 2006, or 2007;

“(B) 50 percent for taxable years beginning in 2008 or 2009;

“(C) 30 percent for taxable years beginning in 2010, 2011, 2012, 2013, or 2014; and

“(D) zero thereafter.”.

(d) Expensing.—Section 179 is amended by adding at the end the following new subsection:

“(e) Property purchased for production of qualified technology.—In the case of section 179 property placed in service in the United States for the primary purpose of producing or manufacturing technology property described in section 41(i)(2), subsection (b)(1) shall be applied by substituting $500,000 for any dollar amount specified therein.”.

(e) Exclusion for interest on loans for production of qualified technology.—

(1) IN GENERAL.—Part III of subchapter B of chapter 1 is amended by inserting after section 139B the following new section:

“SEC. 139C. Interest on loans for production of qualified technology.

“Gross income shall not include 50 percent of the interest received on any obligation the proceeds of which are used exclusively in the production in the United States of a qualified technology property described in section 41(i)(2).”.

(2) CLERICAL AMENDMENT.—The table of sections for part III of subchapter B of chapter 1 is amended by inserting after the item relating to section 139B the following new item:


“Sec. 139C. Interest on loans for production of qualified technology”.

(f) Increased carryovers.—Subsection (a) of section 39 is amended by adding at the end the following new paragraph:

“(3) INCREASED CARRYOVERS FOR CREDITS RELATING TO CERTAIN TECHNOLOGIES.—In the case of the credits allowable under section 38 by reason of section 41(i) or section 46(6)—

“(A) the carryback under paragraphs (1) and (2) shall be 5 years in lieu of 1 year;

“(B) the carryforward paragraphs (1) and (2) shall be 25 years in lieu of 20 years;

“(C) this paragraph shall be applied separately with respect to any other carryover under this section; and

“(D) the determination of the amounts carried over under this paragraph shall be made after this section is applied after the application of subparagraph (C).”.

(g) Alternative minimum tax.—Subsection (a) of section 56 is amended by adding at the end the following new paragraph:

“(8) QUALIFIED TECHNOLOGIES.—Notwithstanding any other provision of this part, no provision of this part shall apply with respect to sections 41(i), 48D, 139C, 168(l), and 179(e).”.

(h) Effective date.—The amendments made by this section shall apply to taxable years beginning after the date of the enactment of this Act.

SEC. 332. Special rules for automotive industry.

(a) In general.—Chapter 77 is amended by adding at the end the following new section:

“SEC. 7529. Special rules for automotive industry.

“(a) In general.—For purposes of sections 41(i), 48D, and 39(a)(3) any vehicle for which a credit is allowed by section 30B shall be treated as a technology described in section 41(i)(2), except that—

“(1) section 41(i)(1) shall be applied by substituting ‘60 percent’ for ‘40 percent’,

“(2) section 48D shall be applied by substituting ‘50 percent’ for ‘35 percent’, and

“(3) section 39(a)(3) shall be applied by substituting ‘30 years’ for ‘25 years’ and ‘10 years’ for ‘5 years’.

“(b) Special rule relating to accelerated depreciation.—For purposes of section 168(l), the applicable percentage shall be the percentage specified in subparagraphs (A), (B), and (C) of paragraph (2) thereof, increased by 10 percentage points.”.

(b) Clerical amendment.—The table of sections for chapter 77 is amended by adding at the end the following new item:


“Sec. 7529. Special rules for automotive industry”.

(c) Effective date.—The amendments made by this section shall apply to taxable years beginning after the date of the enactment of this Act.

SEC. 333. Special rules for high-capacity airplanes.

(a) In general.—Chapter 77 is amended by adding at the end the following new section:

“SEC. 7530. Special rules for high-capacity airplanes.

“(a) In general.—For purposes of sections 41(i), 48D, and 39(a)(3) any high-capacity airplane shall be treated as a technology described in section 41(i)(2), except that—

“(1) section 41(i)(1) shall be applied by substituting ‘60 percent’ for ‘40 percent’;

“(2) section 48D shall be applied by substituting ‘50 percent’ for ‘35 percent’;

“(3) section 39(a)(3) shall be applied by substituting ‘30 years’ for ‘25 years’ and ‘8 years’ for ‘5 years’.

“(b) Special rule relating to accelerated depreciation.—For purposes of section 168(l), the applicable percentage shall be the percentage specified in subparagraphs (A), (B), and (C) of paragraph (2) thereof, increased by 10 percentage points.

“(c) High-capacity airplane.—For purposes of this section, the term ‘high-capacity airplane’ means a commercial airplane which—

“(1) has a passenger seating capacity of no less than 200 people;

“(2) has a range of at least 7,200 nautical miles; and

“(3) consumes at least 15 percent less fuel than comparable airplanes.”.

(b) Clerical amendment.—The table of sections for chapter 77 is amended by adding at the end the following new item:


“Sec. 7530. Special rules for high-capacity airplanes”.

(c) Effective date.—The amendments made by this section shall apply to taxable years beginning after the date of the enactment of this Act.

SEC. 334. New electricity transmission lines designed primarily to carry electricity from renewable energy resources.

The Secretary of the Treasury, in consultation with the Secretary of Energy, the Secretary of Commerce, and the Administrator of the Environmental Protection Agency, shall establish an appropriate investment tax credit for the construction of new electricity transmission lines designed primarily to carry electricity from renewable energy resources. Such credit shall be sufficient to encourage the development of promising rural renewable energy domestic resources that otherwise would likely not be developed.

SEC. 335. New energy technologies commission.

(a) Establishment.—There is established a commission to be known as the “New Energy Technologies Commission” (hereafter in this section referred to as the “Commission”).

(b) Duties.—

(1) IDENTIFY NEW ENERGY TECHNOLOGIES ELIGIBLE FOR TAX INCENTIVES.—

(A) IN GENERAL.—The Commission shall oversee—

(i) the identification of—

(I) Apollo Approved energy efficiency technologies; and

(II) Apollo Approved domestic clean energy production technologies; that the Commission finds substantially contributes to the goals of this Act and merits consideration for favorable tax incentives by Congress; and

(ii) the identification of criteria and standards for determining technologies eligible under clause (i) as qualifying energy efficiency standards used to determine eligibility for the investment, production, and consumption tax incentives outlined in this title.

(B) MATTERS TO BE CONSIDERED BY THE COMMISSION.—In developing energy efficiency standards, the Commission shall—

(i) consult with the Environmental Protection Agency program known as “Energy Star”; and

(ii) focus on technologies manufactured domestically.

(2) REPORT.—Not later than one year after the date of enactment of this Act, and every six months thereafter the Commission shall submit to Congress a report that contains—

(A) a detailed statement of any technology that qualifies for or merits the tax incentives in this title;

(B) recommendations for tax incentives specifically tailored to be beneficial to such technologies and any standards that should be defined in statute to determine eligibility for such benefits; and

(C) recommendations for other legislation, administrative actions, and voluntary actions necessary to implement such incentives.

(3) APOLLO APPROVED ENERGY TECHNOLOGIES.—For purposes of this section, the term “Apollo Approved energy technologies” means any final unit product that the Commission finds substantially contributes to the goals of this Act and merits consideration for favorable tax incentives by Congress not already included in this Act.

(4) APOLLO APPROVED DOMESTIC CLEAN ENERGY PRODUCTION TECHNOLOGIES.—For purposes of this section, the term “Apollo Approved domestic clean energy production technologies” means any domestic energy production technology that the Commission finds substantially contributes to the goals of this Act and merits consideration for favorable tax incentives by Congress not already included in this Act.

(c) Membership.—

(1) IN GENERAL.—The Commission shall be comprised of 11 members.

(2) APPOINTMENTS BY THIS ACT.—The following are hereby designated as members of the Commission:

(A) The Secretary of the Department of Energy, the Director of the Office of Energy Efficiency and Renewable Energy of the Department of Energy, or the Administrator of the Energy Information Administration of the Department of Energy.

(B) The Secretary of the Department of Commerce or designee.

(C) The Secretary of the Department of Treasury or designee.

(D) The Director of the Environmental Protection Agency or designee.

(3) APPOINTMENTS BY THE SENATE AND HOUSE OF REPRESENTATIVES.—7 members appointed jointly by the majority leader and minority leader of the Senate and the Speaker and minority leader of the House of Representatives, of whom—

(A) 1 shall represent consumer advocacy organizations focusing on energy issues;

(B) 1 shall represent auto manufacturers;

(C) 1 shall represent the lending community;

(D) 1 shall represent environmental advocacy organizations focusing on energy issues;

(E) 1 shall represent organized labor;

(F) 1 shall represent small business manufacturers; and

(G) 1 shall represent the energy industry.

(4) DATE OF APPOINTMENTS.—The appointment of a member of the Commission shall be made not later than 30 days after the date of enactment of this Act.

(5) TERM.—A member shall be appointed for 5 year terms.

(d) Powers of commission.—

(1) HEARINGS AND SESSIONS.—The Commission may, for the purpose of carrying out this section, hold hearings, sit and act at times and places, take testimony, and receive evidence to carry out its duties under subsection (b). The Commission may administer oaths or affirmations to witnesses appearing before it.

(2) POWERS OF MEMBERS AND AGENTS.—Any member or agent of the Commission may, if authorized by the Commission, take any action which the Commission is authorized to take by this section.

(3) OBTAINING OFFICIAL INFORMATION.—

(A) REQUIREMENT TO FURNISH.—Except as provided in subparagraph (B), if the Commission submits a request to a Federal department or agency for information necessary to enable the Commission to carry out this section, the head of that department or agency shall furnish that information to the Commission.

(B) EXCEPTION FOR NATIONAL SECURITY.—If the head of a Federal department or agency determines that it is necessary to withhold requested information from disclosure to protect the national security interests of the United States, the department or agency head shall not furnish that information to the Commission.

(4) MAILS.—The Commission may use the United States mails in the same manner and under the same conditions as other departments and agencies of the United States.

(5) ADMINISTRATIVE SUPPORT SERVICES.—Upon the request of the Director, the Administrator of General Services shall provide to the Commission, on a reimbursable basis, the administrative support services necessary for the Commission to carry out this section.

(6) GIFTS AND DONATIONS.—The Commission may accept, use, and dispose of gifts or donations of services or property to carry out this Act, but only to the extent or in the amounts provided in advance in appropriation Acts.

(7) CONTRACTS.—The Commission may contract with and compensate persons and government agencies for supplies and services, without regard to section 3709 of the Revised Statutes (41 U.S.C. 5).

(e) Initial meeting.—The Commission shall hold the initial meeting of the Commission not later than the earlier of—

(1) the date that is 30 days after the date on which all members of the Commission have been appointed; or

(2) the date that is 90 days after the date of enactment of this Act, regardless of whether all members have been appointed.

(f) Chairperson and vice chairperson.—The Commission shall select a Chairperson and Vice Chairperson from among the members of the Commission determined under subsection (c)(2).

(g) Executive committee.—The Commission shall have an executive committee comprised of any five members of the Commission.

(h) Conflicts of interest.—Each member appointed to the Commission shall submit a financial disclosure report pursuant to the Ethics in Government Act of 1978, notwithstanding the minimum required rate of compensation or time period employed.

(i) Staff appointment and compensation.—The Chairperson, in consultation with the Vice Chairperson, in accordance with rules agreed upon by the Commission, may appoint and fix the compensation of a staff director and such other personnel as may be necessary to enable the Commission to carry out its functions, without regard to the provisions of title 5, United States Code, governing appointments in the competitive service, and without regard to the provisions of chapter 51 and subchapter III of chapter 53 of such title relating to classification and General Schedule pay rates; except that no rate of pay fixed under this subsection may exceed the equivalent of that payable for a position at level V of the Executive Schedule under section 5316 of title 5, United States Code.

(j) Personnel as federal employees.—

(1) IN GENERAL.—The staff director and any personnel of the Commission who are employees shall be employees under section 2105 of title 5, United States Code, for purposes of chapters 63, 81, 83, 84, 85, 87, 89, and 90 of that title.

(2) MEMBERS OF COMMISSION.—Subparagraph (A) shall not be construed to apply to members of the Commission.

(k) Detailees.—Any Federal Government employee may be detailed to the Commission without reimbursement from the Commission, and such detailee shall retain the rights, status, and privileges of his or her regular employment without interruption.

(l) Consultant services.—The Commission is authorized to procure the services of experts and consultants in accordance with section 3109 of title 5, United States Code, but at rates not to exceed the daily rate paid a person occupying a position at level IV of the Executive Schedule under section 5315 of title 5, United States Code.

(m) Member compensation.—Each member of the Commission specified in subsection (c)(3) may be compensated at a rate not to exceed the daily equivalent of the annual rate of basic pay in effect for a position at level IV of the Executive Schedule under section 5315 of title 5, United States Code, for each day during which that member is engaged in the actual performance of the duties of the Commission.

(n) Information and administrative expenses.—The Federal agencies and members specified in subsection (c)(3) shall provide the Commission such information and pay such administrative and members expenses as the Commission requires to carry out this section, consistent with the requirements and guidelines of the Federal Advisory Commission Act (5 U.S.C. App.).

(o) Travel expenses.—While away from their homes or regular places of business in the performance of services for the Commission, members of the Commission shall be allowed travel expenses, including per diem in lieu of subsistence, in the same manner as persons employed intermittently in the Government service are allowed expenses under section 5703 of title 5, United States Code.

(p) Authorization of appropriations.—

(1) IN GENERAL.—There is authorized to be appropriated to the Commission such sums as may be necessary to carry out this section.

(2) AVAILABILITY.—Amounts appropriated under paragraph (1) are authorized to remain available until expended.

SEC. 336. Expenditure limitation.

Not later than 6 months after the date of the enactment of this Act, the Secretary of the Treasury shall submit a report to the Congress on the tax expenditures incurred by reason of this subtitle, determined on both an annual basis and for the 10-year period beginning on January 1, 2006, together with such recommendations as the Secretary determines necessary or appropriate to achieve a national 10-year tax expenditure under this subtitle of—

(1) $10,000,000,000 with respect to automobiles, of which $7,000,000,000 shall be expended in the first 5 years of such 10-year period;

(2) $1,500,000,000 with respect to airplanes, of which $1,000,000,000 shall be expended in the first 5 years of such 10-year period, and

(3) $10,500,000,000 with respect to all other tax expenditures under this subtitle, of which—

(A) $6,500,000,000 shall be expended in the first 3 years of such 10-year period;

(B) $2,000,000,000 shall be expended in the fourth and fifth years of such 10-year period; and

(C) $2,000,000,000 shall be expended over the last 5 years of such 10-year period.

SEC. 401. Improved coordination of technology transfer activities.

(a) Technology Transfer Coordinator.—The Secretary shall designate a Technology Transfer Coordinator to perform oversight of and policy development for technology transfer activities at the Department. The Technology Transfer Coordinator shall coordinate the activities of the Technology Transfer Working Group, and shall oversee the expenditure of funds allocated to the Technology Transfer Working Group, and shall coordinate with each technology partnership ombudsman appointed under section 11 of the Technology Transfer Commercialization Act of 2000 (42 U.S.C. 7261c).

(b) Technology Transfer Working Group.—The Secretary shall establish a Technology Transfer Working Group, which shall consist of representatives of the National Laboratories and single-purpose research facilities, to—

(1) coordinate technology transfer activities occurring at National Laboratories and single-purpose research facilities;

(2) exchange information about technology transfer practices, including alternative approaches to resolution of disputes involving intellectual property rights and other technology transfer matters; and

(3) develop and disseminate to the public and prospective technology partners information about opportunities and procedures for technology transfer with the Department, including those related to alternative approaches to resolution of disputes involving intellectual property rights and other technology transfer matters.

(c) Technology transfer responsibility.—Nothing in this section shall affect the technology transfer responsibilities of Federal employees under the Stevenson-Wydler Technology Innovation Act of 1980.

(d) Definition.—For purposes of this section, the term “National Laboratory” means any of the following laboratories owned by the Department:

(A) Ames National Laboratory.

(B) Argonne National Laboratory.

(C) Brookhaven National Laboratory.

(D) Fermi National Laboratory.

(E) Idaho National Engineering and Environmental Laboratory.

(F) Lawrence Berkeley National Laboratory.

(G) Lawrence Livermore National Laboratory.

(H) Los Alamos National Laboratory.

(I) National Energy Technology Laboratory.

(J) National Renewable Energy Laboratory.

(K) Oak Ridge National Laboratory.

(L) Pacific Northwest National Laboratory.

(M) Princeton Plasma Physics Laboratory.

(N) Sandia National Laboratories.

(O) Thomas Jefferson National Accelerator Facility.

SEC. 402. Federal support for commercialization of new technologies.

(a) Program.—The Secretary of Energy shall establish a program of support, through grants, low-interest loans, and loan guarantees, for the commercialization, including support for pilot projects, of new—

(1) renewable energy technologies;

(2) technologies for energy generation from fossil fuels that incorporate carbon sequestration; and

(3) energy efficiency technologies.

(b) Authorization of appropriations.—There are authorized to be appropriated to the Secretary of Energy for carrying out this section $5,000,000,000.

SEC. 403. Clean energy technology exports program.

(a) Definitions.—In this section:

(1) INTERAGENCY WORKING GROUP.—The term “interagency working group” means the Interagency Working Group on Clean Energy Technology Exports established under subsection (b).

(2) UNITED STATES CLEAN ENERGY TECHNOLOGY.—The term “United States clean energy technology” means an energy supply or end-use technology, including a technology using renewable energy sources, that—

(A) over its lifecycle and compared to a similar technology already in commercial use in developing countries, countries in transition, and other partner countries—

(i) emits substantially lower levels of pollutants and/or greenhouse gases; and

(ii) may generate substantially smaller and/or less toxic volumes of solid or liquid waste; and

(B) consists of manufactured articles, materials, and supplies produced in the United States substantially all from articles, materials, or supplies mined, produced, or manufactured in the United States, within the meaning of the Buy American Act (41 U.S.C. 10a).

(b) Interagency Working Group.—

(1) ESTABLISHMENT.—Not later than 90 days after the date of enactment of this section, the Secretary of Energy, the Secretary of Commerce, and the Administrator of the United States Agency for International Development shall jointly establish a Interagency Working Group on Clean Energy Technology Exports. The interagency working group will focus on opening and expanding energy markets and transferring clean energy technology generated in the United States to developing countries, countries in transition, and other partner countries that are expected to experience, over the next 20 years, the most significant growth in energy production and associated greenhouse gas emissions, including through technology transfer programs under the Framework Convention on Climate Change, other international agreements, and relevant Federal efforts.

(2) MEMBERSHIP.—The interagency working group shall be jointly chaired by representatives appointed by the agency heads under paragraph (1) and shall also include representatives from the Department of State, the Department of the Treasury, the Environmental Protection Agency, the Export-Import Bank, the Overseas Private Investment Corporation, the Trade and Development Agency, and other Federal agencies as deemed appropriate by all three agency heads under paragraph (1).

(3) DUTIES.—The interagency working group shall—

(A) analyze technology, policy, and market opportunities for international development, demonstration, and deployment of clean energy technology developed in the United States;

(B) investigate issues associated with building capacity to deploy clean energy technology generated in the United States in developing countries, countries in transition, and other partner countries, including—

(i) energy-sector reform;

(ii) creation of open, transparent, and competitive markets for clean energy technologies;

(iii) availability of trained personnel to deploy and maintain the technology; and

(iv) demonstration and cost-buydown mechanisms to promote first adoption of the technology;

(C) examine relevant trade, tax, international, and other policy issues to assess what policies would help open markets and improve United States clean energy technology exports in support of the following areas—

(i) enhancing energy innovation and cooperation, including energy sector and market reform, capacity building, and financing measures;

(ii) improving energy end-use efficiency technologies, including buildings and facilities, vehicle, industrial, and co-generation technology initiatives; and

(iii) promoting energy supply technologies, including fossil, nuclear, and renewable technology initiatives;

(D) establish an advisory committee involving the private sector and other interested groups on the export and deployment of United States clean energy technology;

(E) monitor each agency’s progress towards meeting goals in the 5-year strategic plan submitted to Congress pursuant to the Energy and Water Development Appropriations Act, 2001, and the Energy and Water Development Appropriations Act, 2002;

(F) make recommendations to heads of appropriate Federal agencies on ways to streamline Federal programs and policies to improve each agency’s role in the international development, demonstration, and deployment of United States clean energy technology;

(G) make assessments and recommendations regarding the distinct technological, market, regional, and stakeholder challenges necessary to carry out the program; and

(H) recommend conditions and criteria that will help ensure that United States funds promote sound energy policies in participating countries while simultaneously opening their markets and exporting United States energy technology.

(c) Federal support for clean energy technology transfer.—Notwithstanding any other provision of law, each Federal agency or Government corporation carrying out an assistance program in support of the activities of United States persons in the environment or energy sector of a developing country, country in transition, or other partner country shall support, to the maximum extent practicable, the transfer of United States clean energy technology as part of that program.

(d) Annual report.—Not later than 90 days after the date of the enactment of this Act, and on March 31 of each year thereafter, the Interagency Working Group shall submit a report to Congress on its activities during the preceding calendar year. The report shall include a description of the technology, policy, and market opportunities for international development, demonstration, and deployment of United States clean energy technology investigated by the Interagency Working Group in that year, as well as any policy recommendations to improve the expansion of clean energy markets and United States clean energy technology exports.

(e) Authorization of appropriations.—There are authorized to be appropriated to the appropriate departments, agencies, and entities of the United States such sums as may be necessary for each of the fiscal years 2006 through 2016 to support the transfer of United States clean energy technology, consistent with the subsidy codes of the World Trade Organization, as part of assistance programs carried out by those departments, agencies, and entities in support of activities of United States persons in the energy sector of a developing country, country in transition, or other partner country.

SEC. 404. International energy technology deployment program.

Section 1608 of the Energy Policy Act of 1992 (42 U.S.C. 13387) is amended by striking subsection (l) and inserting the following:

“(l) International energy technology deployment program.—

“(1) DEFINITIONS.—In this subsection:

“(A) INTERNATIONAL ENERGY DEPLOYMENT PROJECT.—The term ‘international energy deployment project’ means a project to construct an energy production facility outside the United States—

“(i) the output of which will be consumed outside the United States; and

“(ii) the deployment of which will result in a greenhouse gas reduction per unit of energy produced when compared to the technology that would otherwise be implemented—

“(I) 20 percentage points or more, in the case of a unit placed in service before January 1, 2010;

“(II) 40 percentage points or more, in the case of a unit placed in service after December 31, 2009, and before January 1, 2020; or

“(III) 60 percentage points or more, in the case of a unit placed in service after December 31, 2019, and before January 1, 2030.

“(B) QUALIFYING INTERNATIONAL ENERGY DEPLOYMENT PROJECT.—The term ‘qualifying international energy deployment project’ means an international energy deployment project that—

“(i) is submitted by a United States firm to the Secretary in accordance with procedures established by the Secretary by regulation;

“(ii) uses technology that has been successfully developed or deployed in the United States;

“(iii) uses technology that consists of manufactured articles, materials, and supplies produced in the United States substantially from articles, materials, or supplies mined, produced, or manufactured in the United States, within the meaning of the Buy American Act (41 U.S.C. 10a);

“(iv) meets the criteria of subsection (k);

“(v) is approved by the Secretary, with notice of the approval being published in the Federal Register; and

“(vi) complies with such terms and conditions as the Secretary establishes by regulation.

“(C) UNITED STATES.—For purposes of this paragraph, the term ‘United States’, when used in a geographical sense, means the 50 States, the District of Columbia, Puerto Rico, Guam, the Virgin Islands, American Samoa, and the Commonwealth of the Northern Mariana Islands.

“(2) PILOT PROGRAM FOR FINANCIAL ASSISTANCE.—

“(A) IN GENERAL.—Not later than 180 days after the date of enactment of this subsection, the Secretary shall, by regulation, provide for a pilot program for financial assistance for qualifying international energy deployment projects.

“(B) SELECTION CRITERIA.—After consultation with the Secretary of State, the Secretary of Commerce, and the United States Trade Representative, the Secretary shall select projects for participation in the program based solely on the criteria under this title and without regard to the country in which the project is located.

“(C) FINANCIAL ASSISTANCE.—

“(i) IN GENERAL.—A United States firm that undertakes a qualifying international energy deployment project that is selected to participate in the pilot program shall be eligible to receive a loan or a loan guarantee from the Secretary.

“(ii) RATE OF INTEREST.—The rate of interest of any loan made under clause (i) shall be equal to the rate for Treasury obligations then issued for periods of comparable maturities.

“(iii) AMOUNT.—The amount of a loan or loan guarantee under clause (i) shall not exceed 50 percent of the total cost of the qualified international energy deployment project.

“(iv) DEVELOPED COUNTRIES.—Loans or loan guarantees made for projects to be located in a developed country, as listed in Annex I of the United Nations Framework Convention on Climate Change, shall require at least a 50 percent contribution towards the total cost of the loan or loan guarantee by the host country.

“(v) DEVELOPING COUNTRIES.—Loans or loan guarantees made for projects to be located in a developing country (those countries not listed in Annex I of the United Nations Framework Convention on Climate Change) shall require at least a 10 percent contribution towards the total cost of the loan or loan guarantee by the host country.

“(vi) CAPACITY BUILDING RESEARCH.—Proposals made for projects to be located in a developing country may include a research component intended to build technological capacity within the host country. Such research must be related to the technologies being deployed and must involve both an institution in the host country and an industry, university or national laboratory participant from the United States. The host institution shall contribute at least 50 percent of funds provided for the capacity building research.

“(D) COORDINATION WITH OTHER PROGRAMS.—A qualifying international energy deployment project funded under this section shall not be eligible as a qualifying clean coal technology under section 415 of the Clean Air Act (42 U.S.C. 7651n).

“(E) REPORT.—Not later than 5 years after the date of enactment of this subsection, the Secretary shall submit to the President a report on the results of the pilot projects.

“(F) RECOMMENDATION.—Not later than 60 days after receiving the report under subparagraph (E), the President shall submit to Congress a recommendation, based on the results of the pilot projects as reported by the Secretary of Energy, concerning whether the financial assistance program under this section should be continued, expanded, reduced, or eliminated.

“(3) AUTHORIZATION OF APPROPRIATIONS.—There are authorized to be appropriated to the Secretary to carry out this section $500,000,000 for each of fiscal years 2006 through 2016, to remain available until expended.”.

SEC. 405. Risk pool for qualifying advanced clean energy technology.

(a) Establishment.—The Secretary of the Treasury shall establish a financial risk pool which shall be available to any United States owner or developer of a technology that the Secretary determines will help achieve the goals stated in section 102 of this Act (whether or not such owner or developer receives any loan guaranteed under section 731), to offset for the first 3 years of the operation of such technology the costs (not to exceed 5 percent of the total cost of installation) for modifications resulting from the technology’s failure to achieve its design performance.

(b) Authorization of appropriations.—There are authorized to be appropriated $4,500,000,000 to carry out the purposes of this section.

SEC. 406. Federal renewable and clean energy use.

(a) In general.—The President shall take measures necessary to ensure that, within 10 years after the date of the enactment of this Act, at least 20 percent of the electricity consumed by nondefense related activities of the Federal Government shall be generated from renewable sources or zero-emission fossil fuel energy sources.

(b) Solar panels and photovoltaics.—The requirement in subsection (a) may be achieved through the purchase and installation of solar panels or photovoltaics on executive agency properties.

SEC. 407. Require the Export-Import Bank of the United States to meet renewable energy targets in its lending practices.

(a) Allocation of assistance among energy projects.—Of the total amount available to the Export-Import Bank of the United States for the extension of credit for transactions related to energy projects, the Bank shall, not later than the beginning of fiscal year 2008, use—

(1) not more than 85 percent for transactions related to fossil fuel projects; and

(2) not less than 15 percent for transactions related to renewable energy and energy efficiency projects.

(b) Renewable Energy and Technology Commission.—

(1) ESTABLISHMENT.—Within 1 year after the date of the enactment of this Act, the Export-Import Bank of the United States (in this subsection referred to as the “Bank”) shall establish a commission which shall be known as the “Renewable Energy and Technology Commission” (in this subsection referred to as the “Commission”).

(2) FUNCTION.—The Commission shall help the Bank achieve the percentage goal set forth in subsection (a)(2) by the beginning of fiscal year 2008, by proactively assisting the Bank in identifying new opportunities for renewable energy and energy efficiency financing.

(3) COMPOSITION.—The Commission shall be composed of—

(A) 6 representatives selected by companies involved in renewable energy and energy efficiency technology;

(B) 2 representatives selected by environmental organizations;

(C) 2 members of the academic community who are knowledgeable about renewable energy; and

(D) representatives of the Bank.

(4) REPORTS.—The Commission shall submit annually to the Committee on Resources and the Committee on Financial Services of the House of Representatives and the Committee on Banking, Housing, and Urban Affairs of the Senate a report that contains the following information for the fiscal year covered by the report:

(A) A detailed description of the activities of the Commission.

(B) Any recommendations made by the Commission that were adopted by the Bank.

(C) An analysis comparing the level of credit extended by the Bank for renewable energy and energy efficiency projects with the level of credit so extended for the preceding fiscal year.

(c) Definition of renewable energy and energy efficiency projects.—In this section, the term “renewable energy and energy efficiency projects” means projects related to solar, wind, biomass, or geothermal energy sources.

SEC. 408. Grants for transit programs.

(a) In general.—The Secretary of Transportation shall award grants to a State or local governmental authority to improve mass transportation programs, including capital projects.

(b) Authorization of appropriations.—There are authorized to be appropriated to carry out this section $1,500,000,000 for each of 10 fiscal years beginning with the first fiscal year after the date of enactment of this Act.

(c) Labor standards.—The Secretary of Transportation shall not provide a grant under this section unless the Secretary receives reasonable assurances from a State that laborers and mechanics employed by contractors or subcontractors in the performance of construction or modernization on the a transit project will be paid wages not less than those prevailing on similar construction or modernization in the locality as determined by the Secretary of Labor under the Act of March 3, 1931 (known as the Davis-Bacon Act) (40 U.S.C. 276a et seq.).

(d) Definitions.—

(1) GENERAL DEFINITIONS.—For purposes of this section, the terms “capital project”, “local governmental authority”, and “mass transportation” have the same meanings such terms have in section 5302 of title 49, United States Code.

(2) STATE DEFINED.—For purposes of this section, the term “State” means a State of the United States, the District of Columbia, Puerto Rico, the Northern Mariana Islands, Guam, American Samoa, and the United States Virgin Islands.

SEC. 409. Grants for water and sewer improvement programs.

(a) In general.—The Secretary of Transportation shall award grants to a State or local governmental authority to improve water and sewer systems by increasing energy efficiency in such systems by not less than 25 percent.

(b) Authorization of appropriations.—There are authorized to be appropriated to carry out this section $1,000,000,000 for each of 10 fiscal years beginning with the first fiscal year after the date of enactment of this Act.

(c) Labor standards.—The Secretary of Transportation shall not provide a grant under this section unless the Secretary receives reasonable assurances from a State that laborers and mechanics employed by contractors or subcontractors in the performance of construction or modernization on a water or sewer system improvement project will be paid wages not less than those prevailing on similar construction or modernization in the locality as determined by the Secretary of Labor under the Act of March 3, 1931 (known as the Davis-Bacon Act) (40 U.S.C. 276a et seq.).

(d) Definitions.—

(1) GENERAL DEFINITIONS.—For purposes of this section, the terms “capital project”, “local governmental authority”, and “mass transportation” have the same meanings such terms have in section 5302 of title 49, United States Code.

(2) STATE DEFINED.—For purposes of this section, the term “State” means a State of the United States, the District of Columbia, Puerto Rico, the Northern Mariana Islands, Guam, American Samoa, and the United States Virgin Islands.

SEC. 410. Loans for high-efficiency vehicles.

(a) Loan program authorized.—Subject to the availability of appropriations, the Secretary of Transportation shall establish a program to offer federally financed, interest-free loans to local educational agencies, public institutions of higher education, municipalities, and local governments for the purchase of hybrid electric vehicles or high-efficiency vehicles.

(b) Repayment term.—The time for repayment of a loan under this section may not exceed 5 years.

(c) Security interest.—The Secretary shall require, as a condition of a loan under this section, that the borrower grant to the United States a security interest in any vehicle purchased with the proceeds of such loan.

(d) Definitions.—In this section:

(1) The term “high-efficiency vehicle” means a motor vehicle the fuel economy of which is rated at not less than 40 miles per gallon.

(2) The term “hybrid electric vehicle” means a motor vehicle with a fuel-efficient gasoline engine assisted by an electric motor.

(3) The term “motor vehicle” has the meaning given that term in section 30102(a)(6) of title 49, United States Code.

(4) The term “local educational agency” has the meaning given that term in the Elementary and Secondary Education Act of 1965 (20 U.S.C. 6301 et seq.).

(5) The term “public institution of higher education” has the meaning given the term “institution of higher education” in section 101(a) of the Higher Education Act of 1965 (20 U.S.C. 1001(a)), but does not include private institutions described in that section.

(e) Authorization of appropriations.—There are authorized to be appropriated to carry out this section $50,000,000 for each of fiscal years 2006 through 2011 and such sums as may be necessary for each fiscal year thereafter.

SEC. 411. Requirement regarding purchase of motor vehicles by Executive agencies.

(a) In general.—At least ten percent of the motor vehicles purchased by an Executive agency in any fiscal year shall be comprised of high-efficiency vehicles or hybrid electric vehicles.

(b) Definitions.—In this Act:

(1) The term “Executive agency” has the meaning given that term in section 105 of title 5, United States Code, but also includes Amtrak, the Smithsonian Institution, and the United States Postal Service.

(2) The term “high-efficiency vehicle” means a motor vehicle the fuel economy of which is rated at not less than 40 miles per gallon.

(3) The term “hybrid electric vehicle” means a motor vehicle with a fuel-efficient gasoline engine assisted by an electric motor.

(4) The term “motor vehicle” has the meaning given that term in section 102(7) of title 40, United States Code.

(c) Pro-rated applicability in year of enactment.—In the fiscal year in which this Act is enacted, the requirement in subsection (a) shall only apply with respect to motor vehicles purchased after the date of the enactment of this Act in such fiscal year.

SEC. 412. Federal energy efficiency.

The President shall take measures necessary to ensure that electricity consumption for nondefense related activities of the Federal Government shall be decreased by 35 percent by 2015.

SEC. 413. Federal agency ethanol-blended gasoline and biodiesel purchasing requirement.

Title III of the Energy Policy Act of 1992 is amended by striking section 306 (42 U.S.C. 13215) and inserting the following:

“SEC. 306. Federal agency ethanol-blended gasoline and biodiesel purchasing requirement.

“(a) Ethanol-blended gasoline.—The head of each Federal agency shall ensure that, in areas in which ethanol-blended gasoline is reasonably available at a generally competitive price, the Federal agency purchases ethanol-blended gasoline containing at least 85 percent ethanol rather than nonethanol-blended gasoline, for use in vehicles used by the agency that use gasoline. If 85 percent ethanol-blended gasoline is not reasonably available, then each agency shall purchase ethanol-blended gasoline containing at least 10 percent ethanol in areas in which ethanol-blended gasoline is reasonably available at a generally competitive price.

“(b) Biodiesel.—

“(1) DEFINITION OF BIODIESEL.—In this subsection, the term ‘biodiesel’ has the meaning given the term in section 312(f).

“(2) REQUIREMENT.—The head of each Federal agency shall ensure that the Federal agency purchases, for use in fueling fleet vehicles that use diesel fuel used by the Federal agency at the location at which fleet vehicles of the Federal agency are centrally fueled, in areas in which the biodiesel-blended diesel fuel described in subparagraphs (A) and (B) is available at a generally competitive price—

“(A) as of the date that is 5 years after the date of enactment of this paragraph, biodiesel-blended diesel fuel that contains at least 2 percent biodiesel, rather than nonbiodiesel-blended diesel fuel; and

“(B) as of the date that is 10 years after the date of enactment of this paragraph, biodiesel-blended diesel fuel that contains at least 20 percent biodiesel, rather than nonbiodiesel-blended diesel fuel.

“(3) REQUIREMENT OF FEDERAL LAW.—The provisions of this subsection shall not be considered a requirement of Federal law for the purposes of section 312.

“(c) Exemption.—This section does not apply to fuel used in vehicles excluded from the definition of ‘fleet’ by subparagraphs (A) through (H) of section 301(9).”.

SEC. 414. Permitting of wind energy development projects on public lands.

(a) Required policies and procedures.—The Secretary of the Interior shall process right-of-way applications for wind energy site testing and monitoring facilities on public lands administered by the Bureau of Land Management in accordance with policies and procedures that are substantially the same as those set forth in Bureau of Land Management Instruction Memorandum No. 9 2003–020, dated October 16, 2002.

(b) Limitation on rent and other charges.—

(1) IN GENERAL.—The Secretary of the Interior may not impose rent and other charges with respect to any wind energy development project on public lands that, in the aggregate, exceed 50 percent of the maximum amount of rent that could be charged with respect to that project under the terms of the Bureau of Land Management Instruction Memorandum referred to in subsection (a).

(2) TERMINATION.—Paragraph (1) shall not apply after the earlier of—

(A) the date on which the Secretary of the Interior determines there exists at least 10,000 megawatts of electricity generating capacity from nonhydropower renewable energy resources on public lands; or

(B) the end of the 10-year period beginning on the date of the enactment of this Act.

(3) STATE SHARE NOT AFFECTED.—This subsection shall not affect any State share of rent and other charges with respect to any wind energy development project on public lands.

SEC. 415. Energy savings performance contracts.

(a) Permanent extension.—Section 801(c) of the National Energy Conservation Policy Act (42 U.S.C. 8287(c)) is repealed.

(b) Payment of costs.—Section 802 of the National Energy Conservation Policy Act (42 U.S.C. 8287a) is amended by inserting “, water, or wastewater treatment” after “payment of energy”.

(c) Energy savings.—Section 804(2) of the National Energy Conservation Policy Act (42 U.S.C. 8287c(2)) is amended to read as follows:

“(2) The term ‘energy savings’ means a reduction in the cost of energy, water, or wastewater treatment, from a base cost established through a methodology set forth in the contract, used in an existing federally owned building or buildings or other federally owned facilities as a result of—

“(A) the lease or purchase of operating equipment, improvements, altered operation and maintenance, or technical services;

“(B) the increased efficient use of existing energy sources by cogeneration or heat recovery, excluding any cogeneration process for other than a federally owned building or buildings or other federally owned facilities; or

“(C) the increased efficient use of existing water sources in either interior or exterior applications.”.

(d) Energy savings contract.—Section 804(3) of the National Energy Conservation Policy Act (42 U.S.C. 8287c(3)) is amended to read as follows:

“(3) The terms ‘energy savings contract’ and ‘energy savings performance contract’ mean a contract that provides for the performance of services for the design, acquisition, installation, testing, and, where appropriate, operation, maintenance, and repair, of an identified energy or water conservation measure or series of measures at 1 or more locations. Such contracts shall, with respect to an agency facility that is a public building (as such term is defined in section 3301 of title 40, United States Code), be in compliance with the prospectus requirements and procedures of section 3307 of title 40, United States Code.”.

(e) Energy or water conservation measure.—Section 804(4) of the National Energy Conservation Policy Act (42 U.S.C. 8287c(4)) is amended to read as follows:

“(4) The term ‘energy or water conservation measure’ means—

“(A) an energy conservation measure, as defined in section 551; or

“(B) a water conservation measure that improves the efficiency of water use, is life-cycle cost-effective, and involves water conservation, water recycling or reuse, more efficient treatment of wastewater or stormwater, improvements in operation or maintenance efficiencies, retrofit activities, or other related activities, not at a Federal hydroelectric facility.”.

(f) Review.—Not later than 180 days after the date of the enactment of this Act, the Secretary of Energy shall complete a review of the Energy Savings Performance Contract program to identify statutory, regulatory, and administrative obstacles that prevent Federal agencies from fully utilizing the program. In addition, this review shall identify all areas for increasing program flexibility and effectiveness, including audit and measurement verification requirements, accounting for energy use in determining savings, contracting requirements, including the identification of additional qualified contractors, and energy efficiency services covered. The Secretary shall report these findings to Congress and shall implement identified administrative and regulatory changes to increase program flexibility and effectiveness to the extent that such changes are consistent with statutory authority.

SEC. 416. Municipality grants for distributed energy plans.

(a) Program.—The Secretary of Energy shall award grants to municipalities or tribes to facilitate the promulgation of distributed energy implementation plans.

(b) Authorization of appropriations.—There are authorized to be appropriated to the Secretary of Energy for carrying out this section $100,000,000.

SEC. 417. Green building standards for Federal buildings.

(a) Requirement.—A Federal building for which the design phase for construction or major renovation is begun after the date of enactment of this Act shall be designed, constructed, and certified to meet, at a minimum, the LEED silver standard.

(b) Exceptions.—Subsection (a) shall not apply to Federal laboratories or defense facilities, or to a building of a type for which no LEED silver standard exists.

(c) Study.—Not later than 1 year after the date of enactment of this Act, the Secretary of Energy shall transmit to Congress the results of a study comparing the expected energy savings resulting from the implementation of this section with energy savings under all other Federal energy savings requirements. The Secretary shall include any recommendations for changes to Federal law necessary to reduce or eliminate duplicative or inconsistent Federal energy savings requirements.

(d) Definition.—For purposes of this section, the term “LEED silver standard” means the Leadership in Energy and Environmental Design green building rating standard identified as silver by the United States Green Building Council.

SEC. 501. Strategic Petroleum Reserve.

(a) Full capacity.—The President shall—

(1) fill the Strategic Petroleum Reserve established pursuant to part B of title I of the Energy Policy and Conservation Act (42 U.S.C. 6231 et seq.) to full capacity as soon as practicable; and

(2) ensure that the fill rate minimizes impacts on petroleum markets.

(b) Recommendations.—Not later than 180 days after the date of enactment of this Act, the Secretary of Energy shall submit to Congress a plan to—

(1) eliminate any infrastructure impediments that may limit maximum drawdown capability; and

(2) determine whether the capacity of the Strategic Petroleum Reserve on the date of enactment of this section is adequate in light of the increasing consumption of petroleum and the reliance on imported petroleum.

SEC. 502. Regulatory oversight over energy trading markets and metals trading markets.

(a) Jurisdiction of the Commodity Futures Trading Commission over energy trading markets and metals trading markets.—

(1) FERC LIAISON.—Section 2(a)(8) of the Commodity Exchange Act (7 U.S.C. 2(a)(8)) is amended by adding at the end the following:

“(C) FERC LIAISON.—The Commission shall, in cooperation with the Federal Energy Regulatory Commission, maintain a liaison between the Commission and the Federal Energy Regulatory Commission.”.

(2) EXEMPT TRANSACTIONS.—Section 2 of the Commodity Exchange Act (7 U.S.C. 2) is amended—

(A) in subsection (h), by adding at the end the following:

“(7) APPLICABILITY.—This subsection does not apply to an agreement, contract, or transaction in an exempt energy commodity or an exempt metal commodity described in subsection (j)(1).”; and

(B) by adding at the end the following:

“(j) Exempt transactions.—

“(1) TRANSACTIONS IN EXEMPT ENERGY COMMODITIES AND EXEMPT METALS COMMODITIES.—An agreement, contract, or transaction (including a transaction described in section 2(g)) in an exempt energy commodity or exempt metal commodity shall be subject to—

“(A) sections 4b, 4c(a), 4c(b), 4o, and 5b;

“(B) subsections (c) and (d) of section 6 and sections 6c, 6d, and 8a, to the extent that those provisions—

“(i) provide for the enforcement of the requirements specified in this subsection; and

“(ii) prohibit the manipulation of the market price of any commodity in interstate commerce or for future delivery on or subject to the rules of any contract market;

“(C) sections 6c, 6d, 8a, and 9(a)(2), to the extent that those provisions prohibit the manipulation of the market price of any commodity in interstate commerce or for future delivery on or subject to the rules of any contract market;

“(D) section 12(e)(2); and

“(E) section 22(a)(4).

“(2) BILATERAL DEALER MARKETS.—

“(A) IN GENERAL.—Except as provided in paragraph (6), a person or group of persons that constitutes, maintains, administers, or provides a physical or electronic facility or system in which a person has the ability to offer, execute, trade, or confirm the execution of an agreement, contract, or transaction (including a transaction described in section 2(g)) (other than an agreement, contract, or transaction in an excluded commodity) by making or accepting the bids and offers of 1 or more participants on the facility or system (including facilities or systems described in clauses (i) and (iii) of section 1a(33)(B)), the person or group of persons, and the facility or system (referred to in this subsection as a ‘bilateral dealer market’) may offer to enter into, enter into, or confirm the execution of any agreement, contract, or transaction under paragraph (1) (other than an agreement, contract, or transaction in an excluded commodity) if the bilateral dealer market meets the requirement of subparagraph (B).

“(B) REQUIREMENT.—The requirement of this subparagraph is that a bilateral dealer market shall—

“(i) provide notice to the Commission in such form as the Commission may specify by rule or regulation;

“(ii) file with the Commission any reports (including large trader position reports) that the Commission requires by rule or regulation;

“(iii)(I) consistent with section 4i, maintain books and records relating to each transaction in such form as the Commission may specify for a period of 5 years after the date of the transaction; and

“(II) make those books and records available to representatives of the Commission and the Department of Justice for inspection for a period of 5 years after the date of each transaction; and

“(iv) make available to the public on a daily basis such information as total volume by commodity, settlement price, open interest, opening and closing ranges, and any other information that the Commission determines to be appropriate for public disclosure, except that the Commission may not—

“(I) require the real-time publication of proprietary information; or

“(II) prohibit the commercial sale of real-time proprietary information.

“(3) REPORTING REQUIREMENTS.—On request of the Commission, an eligible contract participant that trades on a bilateral dealer market shall provide to the Commission, within the time period specified in the request and in such form and manner as the Commission may specify, any information relating to the transactions of the eligible contract participant on the bilateral dealer market within 5 years after the date of any transaction that the Commission determines to be appropriate.

“(4) CAPITAL REQUIREMENTS.—

“(A) IN GENERAL.—Except as provided in subparagraph (B), a bilateral dealer market shall adopt a value-at-risk model approved by the Commission.

“(B) CAPITAL COMMENSURATE WITH RISK.—If there is an interaction of multiple bids and multiple offers on the bilateral dealer market in a predetermined, nondiscretionary automated trade matching and trade execution algorithm or bids and offers and acceptances of bids and offers made on the bilateral dealer market are binding, a bilateral dealer market shall maintain sufficient capital commensurate with the risk associated with transactions on the bilateral dealer market, as determined by the Commission.

“(5) TRANSACTIONS EXEMPTED BY COMMISSION ACTION.—Any agreement, contract, or transaction on a bilateral dealer market (other than an agreement, contract, or transaction in an excluded commodity) that would otherwise be exempted by the Commission under section 4(c) shall be subject to—

“(A) sections 4b, 4c(a), 4c(b), 4o, and 5b; and

“(B) subsections (c) and (d) of section 6 and sections 6c, 6d, 8a, and 9(a)(2), to the extent that those provisions prohibit the manipulation of the market price of any commodity in interstate commerce or for future delivery on or subject to the rules of any contract market.

“(6) NO EFFECT ON OTHER FERC AUTHORITY.—This subsection does not affect the authority of the Federal Energy Regulatory Commission to regulate transactions under the Federal Power Act (16 U.S.C. 791a et seq.) or the Natural Gas Act (15 U.S.C 717 et seq.).

“(7) APPLICABILITY.—This subsection does not apply to—

“(A) a designated contract market regulated under section 5; or

“(B) a registered derivatives transaction execution facility regulated under section 5a.”.

(3) CONTRACTS DESIGNED TO DEFRAUD OR MISLEAD.—Section 4b of the Commodity Exchange Act (7 U.S.C. 6b) is amended by striking subsection (a) and inserting the following:

“(a) Prohibition.—It shall be unlawful for any member of a registered entity, or for any correspondent, agent, or employee of any member, in or in connection with any order to make, or the making of, any contract of sale of any commodity in interstate commerce, made, or to be made on or subject to the rules of any registered entity, or for any person, in or in connection with any order to make, or the making of, any agreement, transaction, or contract in a commodity subject to this Act—

“(1) to cheat or defraud or attempt to cheat or defraud any person;

“(2) willfully to make or cause to be made to any person any false report or statement, or willfully to enter or cause to be entered any false record;

“(3) willfully to deceive or attempt to deceive any person by any means; or

“(4) to bucket the order, or to fill the order by offset against the order of any person, or willfully, knowingly, and without the prior consent of any person to become the buyer in respect to any selling order of any person, or to become the seller in respect to any buying order of any person.”.

(4) CONFORMING AMENDMENTS.—The Commodity Exchange Act is amended—

(A) in section 2 (7 U.S.C. 2)—

(i) in subsection (h)—

(I) in paragraph (1), by striking “paragraph (2)” and inserting “paragraphs (2) and (7)”; and

(II) in paragraph (3), by striking “paragraph (4)” and inserting “paragraphs (4) and (7)”; and

(ii) in subsection (i)(1)(A), by striking “section 2(h) or 4(c)” and inserting “section 2(h), 2(j), or 4(c)”;

(B) in section 4i (7 U.S.C. 6i)—

(i) by striking “any contract market or” and inserting “any contract market,”; and

(ii) by inserting “, or pursuant to an exemption under section 4(c)” after “transaction execution facility”;

(C) in section 5a(g)(1) (7 U.S.C. 7a(g)(1)), by striking “2(h)” and inserting “2(h) or 2(j)”;

(D) in section 5b (7 U.S.C. 7a–1)—

(i) in subsection (a)(1), by striking “2(h) or” and inserting “2(h), 2(j), or”; and

(ii) in subsection (b), by striking “2(h) or” and inserting “2(h), 2(j), or”; and

(E) in section 12(e)(2)(B) (7 U.S.C. 16(e)(2)(B)), by striking “2(h)” and inserting “2(h), 2(j),”.

(b) Jurisdiction of the Federal Energy Regulatory Commission over energy trading markets.—Section 402 of the Department of Energy Organization Act (42 U.S.C. 7172) is amended by adding at the end the following:

“(i) Jurisdiction over derivatives transactions.—

“(1) IN GENERAL.—To the extent that the Commission determines that any contract that comes before the Commission is not under the jurisdiction of the Commission, the Commission shall refer the contract to the appropriate Federal agency.

“(2) MEETINGS.—A designee of the Commission shall meet quarterly with a designee of the Commodity Futures Trading Commission, the Securities Exchange Commission, the Federal Trade Commission, and the Federal Reserve Board to discuss—

“(A) conditions and events in energy trading markets; and

“(B) any changes in Federal law (including regulations) that may be appropriate to regulate energy trading markets.

“(3) LIAISON.—The Commission shall, in cooperation with the Commodity Futures Trading Commission, maintain a liaison between the Commission and the Commodity Futures Trading Commission.”.

SEC. 503. Increased funding for liheap, weatherization assistance.

(a) Liheap.—(1) Section 2602(b) of the Low-Income Home Energy Assistance Act of 1981 (42 U.S.C. 8621(b)) is amended by striking the first sentence and inserting “There are authorized to be appropriated to carry out the provisions of this title (other than section 2607A), $3,400,000,000 for each of fiscal years 2006 through 2008.”.

(2) Section 2602(e) of the Low-Income Home Energy Assistance Act of 1981 (42 U.S.C. 8621(e)) is amended by striking “$600,000,000” and inserting “$1,000,000,000”.

(3) Section 2609A(a) of the Low-Income Energy Assistance Act of 1981 (42 U.S.C. 8628a(a)) is amended by striking “not more than $300,000” and inserting “not more than $750,000”.

(b) Weatherization assistance.—Section 422 of the Energy Conservation and Production Act (42 U.S.C. 6872) is amended by striking “for fiscal years 1999 through 2003 such sums as may be necessary.” and inserting “$325,000,000 for fiscal year 2006, $400,000,000 for fiscal year 2007, and $500,000,000 for fiscal year 2008.”.

SEC. 504. National energy efficient housing.

(a) Establishment.—There is created a body corporate to be known as the “Federal Energy Efficient Home Mortgage Association” (in this section referred to as the “Corporation”), which shall be regulated by the Office of Federal Housing Enterprise Oversight. The Corporation shall have succession until dissolved by Act of Congress. The Corporation shall maintain its principal office in the District of Columbia and shall be deemed, for purposes of venue in civil actions, to be a resident thereof. The Corporation may establish agencies or offices in such other place or places as it may deem necessary or appropriate in the conduct of its business.

(b) Authority.—The Corporation may—

(1) pursuant to commitments or otherwise, purchase, service, sell, or otherwise deal in any mortgages that meet or exceed the eligibility requirements for the Environmental Protection Agency program known as “Energy Star” including mortgages that were previously purchased, serviced, or held by the Secretary of Housing and Urban Development pursuant to the National Housing Act, any Federal Home Loan Bank, the Government National Mortgage Association, the Department of Veterans Affairs, the Federal National Mortgage Association, or the Federal Home Loan Mortgage Corporation;

(2) purchase, service, sell, lend on the security of, and otherwise deal in loans or advances of credit for the purchase and installation of home energy conserving improvements; and

(3) upon such terms and conditions as it may deem appropriate, issue, and guarantee the timely payment of principal of and interest on, such trust certificates or other securities that are based on and backed by a trust or pool composed of mortgages described in paragraph (1), (2), or (3).

(c) Limitation.—The price of a mortgage purchased by the Corporation pursuant to the authority under subsection (b) may not exceed 100 percent of the unpaid principal amount of the mortgage at the time of purchase, with adjustments for interest and any comparable items.

(d) Borrowing from Treasury.—

(1) AUTHORITY.—The Corporation may issue to the Secretary of the Treasury, and the Secretary may purchase, obligations as may be necessary to fund the operations of the Corporation.

(2) TERMS.—Obligations issued under this subsection shall be in such forms and denomination, bear such maturities and rates of interest, and be subject to such other terms and conditions, as the Secretary of the Treasury shall determine.

(3) PUBLIC DEBT TRANSACTIONS.—For the purpose of purchasing any such obligations, the Secretary may use a public debt transaction the proceeds of the sale of any securities issued under chapter 31 of title 31, United States Code, and the purposes for which securities may be issued under such chapter are extended to include such purpose.

(3) Limitation on amount.—The Secretary of the Treasury shall not at any time purchase any obligations under this subsection if the purchase would increase the aggregate principal amount of the outstanding holdings of obligations under this subsection by the Secretary to an amount greater than $1,000,000,000.

(4) Sale.—The Secretary of the Treasury may at any time sell, upon terms and conditions and at prices determined by the Secretary, any of the obligations acquired by the Secretary under this subsection.

(5) Treatment.—All redemptions, purchases and sales by the Secretary of the Treasury of obligations under this subsection shall be treated as public debt transactions of the United States.

SEC. 505. National net metering requirement for utilities and interconnection standards for distributive energy generation.

The Federal Power Act is amended by adding the following new part at the end thereof:

“PART IVNational requirements affecting retail electric energy

“SEC. 401. Net metering.

“(a) Definitions.—As used in this section:

“(1) The term ‘customer-generator’ means the owner or operator of an electric generation unit qualified for net metering under this section.

“(2) The term ‘net metering’ means measuring the difference between the electricity supplied to a customer-generator and the electricity generated by a customer-generator that is delivered to a local distribution section system at the same point of interconnection during an applicable billing period.

“(3) The terms ‘electric generation unit qualified for net metering’ and ‘qualified generation unit’ mean an electric energy generation unit that meets each of the following requirements:

“(A) The unit is a fuel cell or uses as its energy source either solar, wind, or biomass.

“(B) The unit has a generating capacity of not more than 100 kilowatts.

“(C) The unit is located on premises that are owned, operated, leased, or otherwise controlled by the customer-generator.

“(D) The unit operates in parallel with the retail electric supplier.

“(E) The unit is intended primarily to offset part or all of the customer-generator’s requirements for electric energy.

“(4) The term ‘retail electric supplier’ means any person that sells electric energy to the ultimate consumer thereof.

“(5) The term ‘local distribution system’ means any system for the distribution section of electric energy to the ultimate consumer thereof, whether or not the owner or operator of such system is also a retail electric supplier.

“(b) Adoption.—Not later than one year after the enactment of this section, each retail electric supplier shall comply with each of the following requirements and notify all of its retail customers of such requirements not less frequently than quarterly:

“(1) The supplier shall offer to arrange (either directly or through a local distribution company or other third party) to make available, on a first-come-first-served basis, to each of its retail customers that has installed an energy generation unit that is intended for net metering and that notifies the supplier of its generating capacity an electric energy meter that is capable of net metering if the customer-generator’s existing electrical meter cannot perform that function.

“(2) Rates and charges and contract terms and conditions applicable to the sale by the supplier of electric energy to customer-generators shall be the same as the rates and charges and contract terms and conditions that would be applicable if the customer-generator did not own or operate a qualified generation unit and use a net metering system.

The requirements of this subsection are subject to the percent limitations set forth in subsection (d).

“(c) Net energy measurement and billing.—Each retail electric supplier subject to subsection (b) shall calculate the net energy measurement for a customer using a net metering system in the following manner:

“(1) The retail electric supplier shall measure the net electricity produced or consumed during the billing period using the metering referred to in paragraph (1) of subsection (b) or in subsection (f).

“(2) If the electricity supplied by the retail electric supplier exceeds the electricity generated by the customer-generator during the billing period, the customer-generator shall be billed for the net electricity supplied by the retail electric supplier in accordance with normal metering practices.

“(3) If electricity generated by the customer-generator exceeds the electricity supplied by the retail electric supplier, the customer-generator—

“(A) shall be billed for the appropriate customer charges for that billing period;

“(B) shall be credited for the excess electric energy generated during the billing period, with this credit appearing on the bill to be applied against charges for the following billing period (except for a billing period that ends in the next calendar year); and

“(C) shall not be charged for transmission losses.

If the customer-generator is using a meter that reflects the time of generation (a ‘real time meter’), the credit shall be based on the retail rates for sale by the retail electric supplier at the time of such generation. At the beginning of each calendar year, any remaining unused kilowatt-hour credit accumulated by a customer-generator during the previous year may be sold by the customer-generator to any electric supplier that agrees to purchase such credit. In the absence of any such purchase, the credit shall be assigned (at no cost) to the retail electric supplier that supplied electric energy to such customer-generator at the end of the previous year.

“(d) Percent limitations.—

“(1) TWO PERCENT LIMITATION.—A retail electric supplier shall not be required to comply with subsection (b) with respect to additional customer-generators after the date during any calendar year on which the total generating capacity of all customer-generators with qualified generation facilities and net metering systems served by that supplier is equal to or in excess of 2 percent of the capacity necessary to meet the supplier’s average forecasted aggregate customer peak demand for that calendar year.

“(2) ONE PERCENT LIMITATION.—A retail electric supplier shall not be required to comply with subsection (b) with respect to additional customer-generators using a single type of qualified energy generation system after the date during any calendar year on which the total generating capacity of all customer-generators with qualified generation facilities of that type and net metering systems served by that supplier is equal to or in excess of 1 percent of the capacity necessary to meet the supplier’s average forecasted aggregate customer peak demand for that calendar year.

“(3) RECORDS AND NOTICE.—Each retail electric supplier shall maintain, and make available to the public, records of the total generating capacity of customer-generators of such supplier that are using net metering, the type of generating systems and energy source used by the electric generating systems used by such customer-generators. Each such supplier shall notify the Commission when the total generating capacity of such customer-generators is equal to or in excess of 2 percent of the capacity necessary to meet the supplier’s aggregate customer peak demand during the previous calendar year and when the total generating capacity of such customer-generators using a single type of qualified generation is equal to or in excess of 1 percent of such capacity.

“(e) Safety and performance standards.—(1) A qualified generation unit and net metering system used by a customer-generator shall meet all applicable safety and performance and reliability standards established by the national electrical code, the Institute of Electrical and Electronics Engineers, Underwriters Laboratories, or the American National Standards Institute.

“(2) The Commission, after consultation with State regulatory authorities and nonregulated local distribution systems and after notice and opportunity for comment, may adopt by regulation additional control and testing requirements for customer-generators that the Commission determines are necessary to protect public safety and system reliability.

“(3) The Commission shall, after consultation with State regulatory authorities and nonregulated local distribution systems and after notice and opportunity for comment, prohibit by regulation the imposition of additional charges by electric suppliers and local distribution systems for equipment or services for safety or performance that are additional to those necessary to meet the standards and requirements referred to in paragraphs (2) and (3).

“(f) Additional meters.—Any retail electric supplier or local distribution company may, at its own expense, install one or more additional electric energy meters to monitor the flow of electricity in either direction to and from customer-generators, to identify the time of generation by customer- generators, or both.

“(g) Federal credits.—Whenever a customer-generator with a net metering system uses any energy generation system entitled to credits under a Federal minimum renewable energy generation requirement, the total amount of energy generated by that system shall be treated as generated by the retail electric supplier for purposes of such requirement.

“(h) State authority.—Nothing in this section shall preclude a State from establishing or imposing additional incentives or requirements to encourage qualified generation and net metering additional to that required under this section.

“(i) Interconnection standards.—(1) Within one year after the enactment of this section the Commission shall publish model standards for the physical connection between local distribution systems and qualified generation units and electric generation units that would be qualified generation units but for the fact that the unit has a generating capacity of more than 100 kilowatts (but not more than 250 kilowatts). Such model standards shall be designed to encourage the use of qualified generation units and to insure the safety and reliability of such units and the local distribution systems interconnected with such units. Within 2 years after the enactment of this section, each State shall adopt such model standards, with or without modification, and submit such standards to the Commission for approval. The Commission shall approve a modification of the model standards only if the Commission determines that such modification is consistent with the purpose of such standards and is required by reason of local conditions. If standards have not been approved under this paragraph by the Commission for any State within 2 years after the enactment of this section, the Commission shall, by rule or order, enforce the Commission’s model standards in such State until such time as State standards are approved by the Commission.

“(2) The standards under this section shall establish such measures for the safety and reliability of the affected equipment and local distribution systems as may be appropriate. Such standards shall be consistent with all applicable safety and performance standards established by the national electrical code, the Institute of Electrical and Electronics Engineers, Underwriters Laboratories, or the American National Standards Institute and with such additional safety and reliability standards as the Commission shall, by rule, prescribe. Such standards shall ensure that generation units will automatically isolate themselves from the electrical system in the event of an electrical power outage. Such standards shall permit the owner or operator of the local distribution system to interrupt or reduce deliveries of available energy from the generation unit to the system when necessary in order to construct, install, maintain, repair, replace, remove, investigate, or inspect any of its equipment or part of its system; or if it determines that curtailment, interruption, or reduction is necessary because of emergencies, forced outages, force majeure, or compliance with prudent electrical practices.

“(3) The model standards under this subsection prohibit the imposition of additional charges by local distribution systems for equipment or services for interconnection that are additional to those necessary to meet such standards.

“(j) Interconnection.—At the election of the owner or operator of the generation unit concerned, connections meeting the standards applicable under subsection (g) may be made—

“(1) by such owner or operator at such owner’s or operator’s expense, or

“(2) by the owner or operator of the local distribution system upon the request of the owner or operator of the generating unit and pursuant to an offer by the owner or operator of the generating unit to reimburse the local distribution system in an amount equal to the minimum cost of such connection, consistent with the procurement procedures of the State in which the unit is located, except that the work on all such connections shall be performed by qualified electrical personnel certified by a responsible body or licensed by a State or local government authority.

“(k) Consumer friendly contracts.—The Commission shall promulgate regulations insuring that simplified contracts will be used for the interconnection of electric energy by electric energy transmission or distribution systems and generating facilities that have a power production capacity not greater than 250 kilowatts.”.

(b) Conforming amendments.—Section 316A of the Federal Power Act is amended by striking out “or 214” in both places it appears and inserting “214, or title IV”.

SEC. 506. Appliance standards.

(a) Standards for household appliances in standby mode.—Section 325 of the Energy Policy and Conservation Act (42 U.S.C. 6295) is amended by adding at the end the following:

“(u) Standby mode electric energy consumption by household appliances.—

“(1) DEFINITIONS.—In this subsection:

“(A) HOUSEHOLD APPLIANCE.—The term ‘household appliance’ means any device that uses household electric current and operates in a standby mode except digital televisions, digital set top boxes, and digital video recorders.

“(B) STANDBY MODE.—The term ‘standby mode’ means a mode in which a household appliance uses household electric current but is not in the active or primary operating mode. For products with more than one operating mode, the term ‘standby mode’ means the mode in which the appliance consumes the least amount of electric energy that the household appliance is capable of consuming without being completely switched off.

“(2) STANDARD.—

“(A) IN GENERAL.—Except as provided in subparagraph (B), a household appliance that is manufactured in, or imported for sale in, the United States on or after the date that is 3 years after the date of enactment of this subsection shall not consume in standby mode more than 1 watt.

“(B)(i) HOUSEHOLD APPLIANCES PARTICIPATING IN THE ENERGY STAR PROGRAM.—A household appliance model that, as of the date of enactment of this subsection, is recognized under the Energy Star program administered by the Administrator of the Environmental Protection Agency and the Secretary shall have until January 1, 2010, to meet the standard under subparagraph (A).

“(ii) ANALOG TELEVISIONS.—In the case of analog televisions, the Secretary shall prescribe, on or after the date that is 2 years after the date of enactment of this subsection, in accordance with subsections (o) and (p) of section 325, an energy conservation standard that is technologically feasible and economically justified under section 325(o)(2)(A) (in lieu of the 1 watt standard under subparagraph (A)).

“(3) EXEMPTIONS.—

“(A) APPLICATION.—A manufacturer or importer of a household appliance or their designated agent may submit to the Secretary an application for an exemption of a household appliance of class of appliances from the standard under paragraph (2).

“(B) CRITERIA FOR EXEMPTION.—The Secretary shall grant an exemption for a household appliance of class of appliances for which an application is made under subparagraph (A) if the applicant provides evidence showing that, and the Secretary determines that—

“(i) it is not technically feasible to modify the household appliance or appliances concerned to enable them to meet the standard;

“(ii) the standard is incompatible with an energy efficiency standard applicable to the household appliance of class of appliances under another subsection; or

“(iii) The cost of electricity that a typical consumer would save in operating the household appliance of class of appliances meeting the standard would not equal the increase in the price of the household appliance or class of household appliances that would be attributable to the modifications that would be necessary to enable the household appliance or class of household appliances to meet the standard by the earlier of—

“(I) the date that is 7 years after the date of purchase of the household appliance concerned; or

“(II) the end of the useful life of the household appliance.

“(C) DETERMINATION OF TECHNICAL INFEASIBILITY.—If the Secretary determines that it is not technically feasible to modify a household appliance or class of household appliances to meet the standard under paragraph (2), the Secretary shall establish a different standard for the household appliance or class of household appliances in accordance with the criteria under subsection (l).

“(4) TEST PROCEDURE.—

“(A) IN GENERAL.—Not later than 1 year after the date of enactment of this subsection, the Secretary shall establish a test procedure for determining the amount of consumption of power by a household appliance operating in standby mode.

“(B) CONSIDERATIONS.—In establishing the test procedure, the Secretary shall consider—

“(i) international test procedures under development;

“(ii) test procedures used in connection with the Energy Star program; and

“(iii) test procedures used for measuring power consumption in standby mode in other countries.

“(5) FURTHER REDUCTION OF STANDBY POWER CONSUMPTION.—The Secretary shall provide technical assistance to manufacturers in achieving further reductions in standby mode electric energy consumption by household appliances.

“(v) Standby mode electric energy consumption by digital televisions, digital set top boxes, and digital video recorders.—The Secretary shall initiate within 5 years of the date of enactment of this subsection a rulemaking to prescribe, in accordance with subsections (o) and (p), an energy conservation standard of standby mode electric energy consumption by digital television sets, digital set top boxes, and digital video recorders. The Secretary shall issue a final rule prescribing such standards not later than 18 months thereafter. In determining whether a standard under this section is technologically feasible and economically justified under section 325(o)(2)(A), the Secretary shall consider the potential negative effects on market penetration by digital products covered under this section, and shall consider any recommendations by the FCC regarding such effects.”.

(b) Standards for noncovered products.—

(1) Section 325(m) of the Energy Policy and Conservation Act (42 U.S.C. 6295(m)) is amended as follows:

(A) Inserting “(1)” before “After”.

(B) Inserting the following at the end:

“(2) Not later than one year after the date of enactment of this paragraph, and every 5 years thereafter, the Secretary shall conduct a rulemaking to determine whether consumer or commercial products not classified as a covered product under section 322(a)(1) through (19) meet the criteria of section 322(b)(1). If the Secretary finds that a consumer or commercial product not classified as a covered product meets the criteria of section 322(b)(1), the Secretary shall prescribe, in accordance with subsections (o) and (p), an energy conservation standard for such consumer or commercial product.”.

(2) Part B of title III of such Act is amended as follows:

(A) In the heading for such part by inserting “AND COMMERCIAL” after “CONSUMER”.

(B) In section 321 by striking “consumer product of a type specified in section 322” and inserting: “consumer or commercial product of a type specified in section 322(a)”.

(C) In paragraphs (4), (5), (7), (12), (13), (14), and (15) of section 321 by striking “consumer” in each place it appears and inserting “covered”.

(D) In section 322(a) by inserting “or commercial” after “consumer” in the first place it appears in the material preceding paragraph (1).

(E) In section 322(b), by inserting “or commercial” after “consumer” in each place it appears.

(F) In section 322(b)(1)(B) and (b)(2)(A), by inserting “(or per-business in the case of a commercial product)” after “per-household” in each place it appears.

(G) In section 322(b)(2)(A) by inserting “(or businesses in the case of commercial products)” after “households” in each place it appears.

(H) In section 322(b)(2)(C) by striking “term” and inserting “terms” and by inserting “and ‘business’” after “household”.

(I) In sections 323 though 339, by inserting “or commercial” after “consumer” in each place it appears.

(c) Consumer education on energy efficiency benefits of air conditioning, heating and ventilation maintenance.—Section 337 of the Energy Policy and Conservation Act (42 U.S.C. 6307) is amended by adding the following new subsection after subsection (b):

“(c) HVAC maintenance.—For the purpose of ensuring that installed air conditioning and heating systems operate at their maximum rated efficiency levels, the Secretary shall, within 180 days of the date of enactment of this subsection, develop and implement a public education campaign to educate homeowners and small business owners concerning the energy savings resulting from regularly scheduled maintenance of air conditioning, heating, and ventilating systems. The public service information shall provide sufficient information to allow consumers to make informed choices from among professional, licensed (where State or local licensing is required) contractors. There are authorized to be appropriated to carry out this subsection $5,000,000 for the fiscal years 2006 and 2007 in addition to amounts otherwise appropriated in this part.”.

(d) Efficiency standards for other consumer and commercial products.—

(1) DEFINITIONS.—Section 321 of the Energy Policy and Conservation Act (42 U.S.C. 6291) is amended by adding the following at the end thereof:

“(32) The term ‘residential furnace fan’ means an electric fan installed as part of a furnace for purposes of circulating air through the system air filters, the heat exchangers or heating elements of the furnace, and the duct work.

“(33) The terms ‘residential central air conditioner fan’ and ‘heat pump circulation fan’ mean an electric fan installed as part of a central air conditioner or heat pump for purposes of circulating air through the system air filters, the heat exchangers of the air conditioner or heat pump, and the duct work.

“(34) The term ‘suspended ceiling fan’ means a fan intended to be mounted to a ceiling outlet box, ceiling building structure, or to a vertical rod suspended from the ceiling, and which as blades which rotate below the ceiling and consists of an electric motor, fan blades (which rotate in a direction parallel to the floor), an optional lighting kit, and one or more electrical controls (integral or remote) governing fan speed and lighting operation.

“(35) The term ‘refrigerated bottled or canned beverage vending machine’ means a machine that cools bottled or canned beverages and dispenses them upon payment.

“(36) AUTOMATIC COMMERCIAL ICEMAKER.—The term ‘automatic commercial icemaker’ means a factory-made assembly that

“(A) consists of a condensing unit and icemaking section operating as an integrated unit, with means for making and harvesting ice;

“(B) may include means for storing or dispensing ice; and

“(C) may or may not be shipped in 1 package.

“(37) COMMERCIAL FREEZER.—The term ‘commercial freezer’ means a freezer that is not a consumer product regulated under this Act.

“(38) COMMERCIAL REFRIGERATOR.—The term ‘commercial refrigerator’ means a refrigerator that is not a consumer product regulated under this Act.

“(39) COMMERCIAL REFRIGERATOR-FREEZER.—The term ‘commercial refrigerator-freezer’ means a refrigerator-freezer that is not a consumer product regulated under this Act.

“(40) ICEMAKING HEAD.—The term ‘icemaking head’ means an automatic commercial icemaker that does not include a storage compartment in an integral cabinet.

“(41) ILLUMINATED EXIT SIGN.—The term ‘illuminated exit sign’ means a sign that

“(A) is designed to be permanently fixed in place to identify an exit; and

“(B) CONSISTS OF.—

“(i) a light source that illuminates the sign or letters from within; and

“(iii) a background that is not transparent.

“(42) REMOTE CONDENSING ICEMAKER.—The term ‘remote condensing icemaker’ means an automatic commercial icemaker in which the icemaking mechanism and condensing unit are in separate sections.

“(43) TRAFFIC SIGNAL MODULE.—The term ‘traffic signal module’ means a standard 8-inch (200mm) or 12-inch (300mm) traffic signal indication, consisting of a light source, a lens, and all other parts necessary for operation, that communicates movement messages to drivers through red, amber, and green colors.

“(44) TORCHIERE FIXTURE.—The term ‘torchiere fixture’ means a portable electric lighting fixture with a reflector bowl that directs light upward so as to give indirect illumination.

“(45) UNIT HEATER.—The term ‘unit heater’ means a self-contained fan-type heater designed to be installed within the heated space. Unit heaters include an apparatus or appliance to supply heat, and a fan for circulating air over a heat exchange surface, all enclosed in a common casing. Unit heaters do not include furnaces as defined in this Act.”.

(2) TESTING REQUIREMENTS.—Section 323 of the Energy Policy and Conservation Act (42 U.S.C. 6293) is amended by adding the following at the end thereof:

“(f) Additional consumer products.—The Secretary shall within 18 months after the date of enactment of this subsection prescribe testing requirements for the consumer and commercial products referred to in paragraphs (36) though (45) of section 321. Such testing requirements shall be based on existing test procedures used in industry to the extent practical and reasonable. In the case of residential furnace fans, residential central air conditioner fans or heat pump circulation fans, and suspended ceiling fans unit heaters, such test procedures shall include efficiency at both maximum output and at an output no more than 50 percent of the maximum output.”.

(3) STANDARDS FOR ADDITIONAL CONSUMER PRODUCTS.—Section 325 of the Energy Policy and Conservation Act (42 U.S.C. 6295), as amended by subsection (a) of this section, is amended by adding the following at the end thereof:

“(w) Residential, other consumer, and commercial products.—(1) The Secretary shall, within 18 months after the date of enactment of this subsection, assess the current and projected future market for the consumer, and commercial products referred to in paragraphs (36) through (45) of section 321, furnace fans, residential central air conditioner fans and heat pump circulation fans, suspended ceiling fans, and refrigerated bottled or canned beverage vending machines. This assessment shall include an examination of the types of these products sold, the number of these products in use, annual sales of these products, energy used by these products sold, estimates of the potential energy savings from specific technical improvements to these products, and an examination of the cost-effectiveness of these improvements. Prior to the end of this time period, the Secretary shall hold an initial scoping workshop to discuss and receive input to plans for developing minimum efficiency standards for these products.

“(2) The Secretary shall within 24 months after the date on which testing requirements are prescribed by the Secretary pursuant to section 323(f), prescribe, by rule, energy conservation standards for residential furnace fans, residential central air conditioner fans and heat pump circulation fans, suspended ceiling fans, and refrigerated bottled or canned beverage vending machines. In establishing these standards, the Secretary shall use the criteria and procedures contained in this section. Any standard prescribed under this section shall apply to products manufactured 36 months after the date such rule is published.”.

(4) LABELING.—Section 324(a) of the Energy Policy and Conservation Act (42 U.S.C. 6294(a)) is amended by adding the following at the end thereof:

“(5) The Secretary shall within 6 months after the date on which energy conservation standards are prescribed by the Secretary, prescribe, by rule, labeling requirements for the consumer and commercial products referred to in paragraphs (33) though (45) of section 321. These requirements shall take effect on the same date as the standards prescribed pursuant to section 325(w).”.

(5) COVERED PRODUCTS.—Section 322(a) of the Energy Policy and Conservation Act (42 U.S.C. 6292(a)) is amended by redesignating paragraph (19) as (20) and by inserting the following after paragraph (18):

“(19) Beginning on the effective date for standards established pursuant to subsection (w) of section 325, each product referred to in such subsection (w).”.

(e) Air conditioner energy efficiency rules.—Section 325(o)(1) of the Energy Policy and Conservation Act is amended by adding the following at the end thereof: “Any rule relating to the energy efficiency of air conditioners that violates the preceding sentence shall have no force and effect after the date of the enactment of this sentence.”.

SEC. 507. Energy Star certification for solar water heaters.

Not later than January 1, 2007, the Secretary, in consultation with the Administrator of the Environmental Protection Agency, shall adopt regulations establishing Energy Star Program requirements and an Energy Star rating program for commercial and residential solar water heating devices.

SEC. 508. Electric reliability standards.

Part II of the Federal Power Act (16 U.S.C. 824 et seq.) is amended by adding at the end the following:

“SEC. 215. Electric reliability.

“(a) Definitions.—In this section—

“(1) ‘bulk power system’ means the network of interconnected transmission facilities and generating facilities;

“(2) ‘electric reliability organization’ means a self-regulating organization certified by the Commission under subsection (c) whose purpose is to promote the reliability of the bulk power system; and

“(3) ‘reliability standard’ means a requirement to provide for reliable operation of the bulk power system approved by the Commission under this section.

“(b) Jurisdiction and applicability.—The Commission shall have jurisdiction, within the United States, over an electric reliability organization, any regional entities, and all users, owners and operators of the bulk power system, including but not limited to the entities described in section 201(f), for purposes of approving reliability standards and enforcing compliance with this section. All users, owners and operators of the bulk power system shall comply with reliability standards that take effect under this section.

“(c) Certification.—

“(1) The Commission shall issue a final rule to implement the requirements of this section not later than 180 days after the date of enactment of this section.

“(2) Following the issuance of a Commission rule under paragraph (1), any person may submit an application to the Commission for certification as an electric reliability organization. The Commission may certify an applicant if the Commission determines that the applicant—

“(A) has the ability to develop, and enforce reliability standards that provide for an adequate level of reliability of the bulk power system; and

“(B) has established rules that—

“(i) assure the independence of the applicant from the users and owners and operators of the bulk power system while assuring fair stakeholder representation in the selection of its directors and balanced decision making in any committee or subordinate organizational structure;

“(ii) allocate equitably dues, fees, and other charges among users for all activities under this section;

“(iii) provide fair and impartial procedures for enforcement of reliability standards through imposition of penalties (including limitations on activities, functions, or operations, or other appropriate sanctions) and

“(iv) provide for reasonable notice and opportunity for public comment, due process, openness, and balance of interests in developing reliability standards and otherwise exercising its duties.

“(3) If the Commission receives 2 or more timely applications that satisfy the requirements of this subsection, the Commission shall approve only the application the Commission concludes will best implement the provisions of this section.

“(d) Reliability standards.—

“(1) An electric reliability organization shall file a proposed reliability standard or modification to a reliability standard with the Commission.

“(2) The Commission may approve a proposed reliability standard or modification to a reliability standard if it determines that the standard is just, reasonable, not unduly discriminatory or preferential, and in the public interest. The Commission shall give due weight to the technical expertise of the electric reliability organization with respect to the content of a proposed standard or modification to a reliability standard, but shall not defer with respect to its effect on competition.

“(3) The electric reliability organization and the Commission shall rebuttably presume that a proposal from a regional entity organized on an interconnection-wide basis for a reliability standard or modification to a reliability standard to be applicable on an interconnection-wide basis is just, reasonable, and not unduly discriminatory or preferential, and in the public interests.

“(4) The Commission shall remand to the electric reliability organization for further consideration a proposed reliability standard or a modification to a reliability standard that the Commission disapproves in whole or in part.

“(5) The Commission, upon its own motion or upon complaint, may order an electric reliability organization to submit to the Commission a proposed reliability standard or a modification to a reliability standard that addresses a specific matter if the Commission considers such a new or modified reliability standard appropriate to carry out this section.

“(e) Enforcement.—

“(1) An electric reliability organization may impose a penalty on a user or owner or operator of the bulk power system if the electric reliability organization, after notice and an opportunity for a hearing—

“(A) finds that the user or owner or operator of the bulk power system has violated a reliability standard approved by the Commission under subsection (d); and

“(B) files notice with the Commission, which shall affirm, set aside, or modify the action.

“(2) On its own motion or upon complaint, the Commission may order compliance with a reliability standard and may impose a penalty against a user or owner or operator of the bulk power system if the Commission finds, after notice and opportunity for a hearing, that the user or owner or operator of the bulk power system has violated or threatens to violate a reliability standard.

“(3) The Commission shall establish regulations authorizing the electric reliability organization to enter into an agreement to delegate authority to a regional entity for the purpose of proposing and enforcing reliability standards (including related activities) if the regional entity satisfies the provisions of subparagraphs (A) and (B) of subsection (c)(2) and the agreement promotes effective and efficient administration of bulk power system reliability. The Commission may modify such delegation. The electric reliability organization and the Commission shall rebuttably presume that a proposal for delegation to a regional entity organized on a interconnection-wide basis promotes effective and efficient administration of bulk power system reliability and should be approved. Such regulation may provide that the Commission may assign the electric reliability organization’s authority to enforce reliability standards directly to a regional entity consistent with the requirements of this paragraph.

“(4) The Commission may take such action as is necessary or appropriate against the electric reliability organization or a regional entity to ensure compliance with a reliability standard or any Commission order affecting the electric reliability organization or a regional entity.

“(f) Changes in electricity reliability organization rules.—An electric reliability organization shall file with the Commission for approval any proposed rule or proposed rule change, accompanied by an explanation of its basis and purpose. The Commission, upon its own motion or complaint, may propose a change to the rules of the electric reliability organization. A proposed rule or proposed rule change shall take effect upon a finding by the Commission, after notice and opportunity for comment, that the change is just, reasonable, not unduly discriminatory or preferential, is in the public interest, and satisfies the requirements of subsection (c)(2).

“(g) Coordination With Canada and Mexico.—

“(1) The electric reliability organization shall take all appropriate steps to gain recognition in Canada and Mexico.

“(2) The President shall use his best efforts to enter into international agreements with the governments of Canada and Mexico to provide for effective compliance with reliability standards and the effectiveness of the electric reliability organization in the United States and Canada or Mexico.

“(h) Reliability reports.—The electric reliability organization shall conduct periodic assessments of the reliability and adequacy of the interconnected bulk power system in North America.

“(i) Savings Provisions.—

“(1) The electric reliability organization shall have authority to develop and enforce compliance with standards for the reliable operation of only the bulk power system.

“(2) This section does not provide the electric reliability organization or the Commission with authority to order the construction of additional generation or transmission capacity or to set and enforce compliance with standards for adequacy or safety of electric facilities or services.

“(3) Nothing in this section shall be construed to preempt any authority of any State to take action to ensure the safety, adequacy, and reliability of electric service within that State, as long as such action is not inconsistent with any reliability standard established under this section.

“(4) Not later than 90 days after the date of the application of the electric reliability organization or other affected party, and after notice and opportunity for comment, the Commission shall issue a final order determining whether a State action is inconsistent with a reliability standard, taking into consideration any recommendation of the electric reliability organization.

“(5) The Commission, after consultation with the electric reliability organization, may stay the effectiveness of any State action, pending the Commission’s issuance of a final order.

“(j) Application of Antitrust Laws.—