SEC. 1900. SHORT TITLE; ETC.

(a) SHORT TITLE- This division may be cited as the `Energy Tax Incentives Act of 2002'.

(b) AMENDMENT OF 1986 CODE- Except as otherwise expressly provided, whenever in this division 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.

TITLE XIX--EXTENSION AND MODIFICATION OF RENEWABLE ELECTRICITY PRODUCTION TAX CREDIT

SEC. 1901. THREE-YEAR EXTENSION OF CREDIT FOR PRODUCING ELECTRICITY FROM WIND AND POULTRY WASTE.

(a) IN GENERAL- Subparagraphs (A) and (C) of section 45(c)(3) (relating to qualified facility), as amended by section 603(a) of the Job Creation and Worker Assistance Act of 2002, are each amended by striking `January 1, 2004' and inserting `January 1, 2007'.

(b) EFFECTIVE DATE- The amendments made by this section shall apply to electricity sold after the date of the enactment of this Act, in taxable years ending after such date.

SEC. 1902. CREDIT FOR ELECTRICITY PRODUCED FROM BIOMASS.

(a) EXTENSION AND MODIFICATION OF PLACED-IN-SERVICE RULES- Paragraph (3) of section 45(c) is amended--
(1) by striking subparagraph (B) and inserting the following new subparagraph:
`(B) CLOSED-LOOP BIOMASS FACILITY-
`(i) IN GENERAL- In the case of a facility using closed-loop biomass to produce electricity, the term `qualified facility' means any facility--
`(I) owned by the taxpayer which is originally placed in service after December 31, 1992, and before January 1, 2007, or

`(II) owned by the taxpayer which is originally placed in service before January 1, 1993, and modified to use closed-loop biomass to co-fire with coal before January 1, 2007, as approved under the Biomass Power for Rural Development Programs or under a pilot project of the Commodity Credit Corporation as described in 65 Fed. Reg. 63052.

`(ii) SPECIAL RULES- In the case of a qualified facility described in clause (i)(II)--

`(I) the 10-year period referred to in subsection (a) shall be treated as beginning no earlier than the date of the enactment of this subclause, and

`(II) if the owner of such facility is not the producer of the electricity, the person eligible for the credit allowable under subsection (a) is the lessee or the operator of such facility.', and

(2) by adding at the end the following new subparagraph:

`(D) BIOMASS FACILITY-
`(i) IN GENERAL- In the case of a facility using biomass (other than closed-loop biomass) to produce electricity, the term `qualified facility' means any facility owned by the taxpayer which is originally placed in service before January 1, 2005.

`(ii) SPECIAL RULE FOR POSTEFFECTIVE DATE FACILITIES- In the case of any facility described in clause (i) which is placed in service after the date of the enactment of this clause, the 3-year period beginning on the date the facility is originally placed in service shall be substituted for the 10-year period in subsection (a)(2)(A)(ii).

`(iii) SPECIAL RULES FOR PREEFFECTIVE DATE FACILITIES- In the case of any facility described in clause (i) which is placed in service before the date of the enactment of this clause--

`(I) subsection (a)(1) shall be applied by substituting `1.0 cents' for `1.5 cents', and

`(II) the 3-year period beginning after December 31, 2002, shall be substituted for the 10-year period in subsection (a)(2)(A)(ii).

`(iv) CREDIT ELIGIBILITY- In the case of any facility described in clause (i), if the owner of such facility is not the producer of the electricity, the person eligible for the credit allowable under subsection (a) is the lessee or the operator of such facility.'.

(b) DEFINITION OF BIOMASS-

(1) IN GENERAL- Section 45(c)(1) (defining qualified energy resources) is amended--
(A) by striking `and' at the end of subparagraph (B),

(B) by striking the period at the end of subparagraph (C) and inserting `, and', and

(C) by adding at the end the following new subparagraph:

`(D) biomass (other than closed-loop biomass).'.

(2) BIOMASS DEFINED- Section 45(c) (relating to definitions) is amended by adding at the end the following new paragraph:

`(5) BIOMASS- The term `biomass' means any solid, nonhazardous, cellulosic waste material which is segregated from other waste materials and which is derived from--

`(A) any of the following forest-related resources: mill residues, precommercial thinnings, slash, and brush, but not including old-growth timber (other than old-growth timber which has been permitted or contracted for removal by any appropriate Federal authority through the National Environmental Policy Act or by any appropriate State authority),

`(B) solid wood waste materials, including waste pallets, crates, dunnage, manufacturing and construction wood wastes (other than pressure-treated, chemically-treated, or painted wood wastes), and landscape or right-of-way tree trimmings, but not including municipal solid waste (garbage), gas derived from the biodegradation of solid waste, or paper that is commonly recycled, or

`(C) agriculture sources, including orchard tree crops, vineyard, grain, legumes, sugar, and other crop by-products or residues.'.

(c) COORDINATION WITH SECTION 29- Section 45(c) (relating to definitions) is amended by adding at the end the following new paragraph:

`(6) COORDINATION WITH SECTION 29- The term `qualified facility' shall not include any facility the production from which is taken into account in determining any credit under section 29 for the taxable year or any prior taxable year.'.

(d) CLERICAL AMENDMENTS-

(1) The heading for subsection (c) of section 45 is amended by inserting `AND SPECIAL RULES' after `DEFINITIONS'.

(2) The heading for subsection (d) of section 45 is amended by inserting `ADDITIONAL' before `DEFINITIONS'.

(e) EFFECTIVE DATES-

(1) IN GENERAL- Except as provided in paragraph (2), the amendments made by this section shall apply to electricity sold after the date of the enactment of this Act.

(2) CERTAIN BIOMASS FACILITIES- With respect to any facility described in section 45(c)(3)(D)(i) of the Internal Revenue Code of 1986, as added by this section, which is placed in service before the date of the enactment of this Act, the amendments made by this section shall apply to electricity sold after December 31, 2002.

SEC. 1903. CREDIT FOR ELECTRICITY PRODUCED FROM SWINE AND BOVINE WASTE NUTRIENTS, GEOTHERMAL ENERGY, AND SOLAR ENERGY.

(a) EXPANSION OF QUALIFIED ENERGY RESOURCES-
(1) IN GENERAL- Section 45(c)(1) (defining qualified energy resources), as amended by this Act, is amended by striking `and' at the end of subparagraph (C), by striking the period at the end of subparagraph (D) and inserting a comma, and by adding at the end the following new subparagraphs:
`(E) swine and bovine waste nutrients,

`(F) geothermal energy, and

`(G) solar energy.'.

(2) DEFINITIONS- Section 45(c) (relating to definitions and special rules), as amended by this Act, is amended by redesignating paragraph (6) as paragraph (8) and by inserting after paragraph (5) the following new paragraphs:

`(6) SWINE AND BOVINE WASTE NUTRIENTS- The term `swine and bovine waste nutrients' means swine and bovine manure and litter, including bedding material for the disposition of manure.

`(7) GEOTHERMAL ENERGY- The term `geothermal energy' means energy derived from a geothermal deposit (within the meaning of section 613(e)(2)).'.

(b) EXTENSION AND MODIFICATION OF PLACED-IN-SERVICE RULES- Section 45(c)(3) (relating to qualified facility), as amended by this Act, is amended by adding at the end the following new subparagraphs:

`(E) SWINE AND BOVINE WASTE NUTRIENTS FACILITY- In the case of a facility using swine and bovine waste nutrients to produce electricity, the term `qualified facility' means any facility owned by the taxpayer which is originally placed in service after the date of the enactment of this subparagraph and before January 1, 2007.

`(F) GEOTHERMAL OR SOLAR ENERGY FACILITY-

`(i) IN GENERAL- In the case of a facility using geothermal or solar energy to produce electricity, the term `qualified facility' means any facility owned by the taxpayer which is originally placed in service after the date of the enactment of this clause and before January 1, 2007.

`(ii) SPECIAL RULE- In the case of any facility described in clause (i), the 5-year period beginning on the date the facility was originally placed in service shall be substituted for the 10-year period in subsection (a)(2)(A)(ii).'.

(d) EFFECTIVE DATE- The amendments made by this section shall apply to electricity sold after the date of the enactment of this Act, in taxable years ending after such date.

SEC. 1904. TREATMENT OF PERSONS NOT ABLE TO USE ENTIRE CREDIT.

(a) IN GENERAL- Section 45(d) (relating to additional definitions and special rules), as amended by this Act, is amended by adding at the end the following new paragraph:
`(8) TREATMENT OF PERSONS NOT ABLE TO USE ENTIRE CREDIT-
`(A) ALLOWANCE OF CREDIT-
`(i) IN GENERAL- Except as otherwise provided in this subsection--
`(I) any credit allowable under subsection (a) with respect to a qualified facility owned by a person described in clause (ii) may be transferred or used as provided in this paragraph, and

`(II) the determination as to whether the credit is allowable shall be made without regard to the tax-exempt status of the person.

`(ii) PERSONS DESCRIBED- A person is described in this clause if the person is--

`(I) an organization described in section 501(c)(12)(C) and exempt from tax under section 501(a),

`(II) an organization described in section 1381(a)(2)(C),

`(III) a public utility (as defined in section 136(c)(2)(B)), which is exempt from income tax under this subtitle,

`(IV) any State or political subdivision thereof, the District of Columbia, any possession of the United States, or any agency or instrumentality of any of the foregoing, or

`(V) any Indian tribal government (within the meaning of section 7871) or any agency or instrumentality thereof.

`(B) TRANSFER OF CREDIT-

`(i) IN GENERAL- A person described in subparagraph (A)(ii) may transfer any credit to which subparagraph (A)(i) applies through an assignment to any other person not described in subparagraph (A)(ii). Such transfer may be revoked only with the consent of the Secretary.

`(ii) REGULATIONS- The Secretary shall prescribe such regulations as necessary to ensure that any credit described in clause (i) is claimed once and not reassigned by such other person.

`(iii) TRANSFER PROCEEDS TREATED AS ARISING FROM ESSENTIAL GOVERNMENT FUNCTION- Any proceeds derived by a person described in subclause (III), (IV), or (V) of subparagraph (A)(ii) from the transfer of any credit under clause (i) shall be treated as arising from the exercise of an essential government function.

`(C) USE OF CREDIT AS AN OFFSET- Notwithstanding any other provision of law, in the case of a person described in subclause (I), (II), or (V) of subparagraph (A)(ii), any credit to which subparagraph (A)(i) applies may be applied by such person, to the extent provided by the Secretary of Agriculture, as a prepayment of any loan, debt, or other obligation the entity has incurred under subchapter I of chapter 31 of title 7 of the Rural Electrification Act of 1936 (7 U.S.C. 901 et seq.), as in effect on the date of the enactment of the Energy Tax Incentives Act of 2002.

`(D) CREDIT NOT INCOME- Any transfer under subparagraph (B) or use under subparagraph (C) of any credit to which subparagraph (A)(i) applies shall not be treated as income for purposes of section 501(c)(12).

`(E) TREATMENT OF UNRELATED PERSONS- For purposes of subsection (a)(2)(B), sales among and between persons described in subparagraph (A)(ii) shall be treated as sales between unrelated parties.'.

(b) CREDITS NOT REDUCED BY TAX-EXEMPT BONDS OR CERTAIN OTHER SUBSIDIES- Section 45(b)(3) (relating to credit reduced for grants, tax-exempt bonds, subsidized energy financing, and other credits) is amended--

(1) by striking clause (ii),

(2) by redesignating clauses (iii) and (iv) as clauses (ii) and (iii),

(3) by inserting `(other than 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.), as in effect on the date of the enactment of the Energy Tax Incentives Act of 2002)' after `project' in clause (ii) (as so redesignated),

(4) by adding at the end the following new sentence: `This paragraph shall not apply with respect to any facility described in subsection (c)(3)(B)(i)(II).', and

(5) by striking `TAX-EXEMPT BONDS,' in the heading and inserting `CERTAIN'.

(c) EFFECTIVE DATE- The amendments made by this section shall apply to electricity sold after the date of the enactment of this Act, in taxable years ending after such date.

SEC. 1905. CREDIT FOR ELECTRICITY PRODUCED FROM SMALL IRRIGATION POWER.

(a) IN GENERAL- Section 45(c)(1) (defining qualified energy resources), as amended by this Act, is amended by striking `and' at the end of subparagraph (F), by striking the period at the end of subparagraph (G) and inserting `, and', and by adding at the end the following new subparagraph:
`(H) small irrigation power.'.

(b) QUALIFIED FACILITY- Section 45(c)(3) (relating to qualified facility), as amended by this Act, is amended by adding at the end the following new subparagraph:

`(G) SMALL IRRIGATION POWER FACILITY- In the case of a facility using small irrigation power to produce electricity, the term `qualified facility' means any facility owned by the taxpayer which is originally placed in service after date of the enactment of this subparagraph and before January 1, 2007.'.

(c) DEFINITION- Section 45(c), as amended by this Act, is amended by redesignating paragraph (8) as paragraph (9) and by inserting after paragraph (7) the following new paragraph:

`(8) SMALL IRRIGATION POWER- The term `small irrigation power' means power--
`(A) generated without any dam or impoundment of water through an irrigation system canal or ditch, and

`(B) the installed capacity of which is less than 5 megawatts.'.

(d) EFFECTIVE DATE- The amendments made by this section shall apply to electricity sold after the date of the enactment of this Act, in taxable years ending after such date.

SEC. 1906. CREDIT FOR ELECTRICITY PRODUCED FROM MUNICIPAL BIOSOLIDS AND RECYCLED SLUDGE.

(a) IN GENERAL- Section 45(c)(1) (defining qualified energy resources), as amended by this Act, 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) municipal biosolids, and

`(I) recycled sludge.'.

(b) QUALIFIED FACILITIES- Section 45(c)(3) (relating to qualified facility), as amended by this Act, is amended by adding at the end the following new subparagraphs:

`(G) MUNICIPAL BIOSOLIDS FACILITY- In the case of a facility using municipal biosolids to produce electricity, the term `qualified facility' means any facility owned by the taxpayer which is originally placed in service after December 31, 2001, and before January 1, 2007.

`(H) RECYCLED SLUDGE FACILITY-

`(i) IN GENERAL- In the case of a facility using recycled sludge to produce electricity, the term `qualified facility' means any facility owned by the taxpayer which is originally placed in service before January 1, 2007.

`(ii) SPECIAL RULE- In the case of a qualified facility described in clause (i), the 10-year period referred to in subsection (a) shall be treated as beginning no earlier than the date of the enactment of this subparagraph.'.

(c) DEFINITIONS- Section 45(c), as amended by this Act, is amended by redesignating paragraph (8) as paragraph (10) and by inserting after paragraph (7) the following new paragraphs:

`(8) MUNICIPAL BIOSOLIDS- The term `municipal biosolids' means the residue or solids removed by a municipal wastewater treatment facility.

`(9) RECYCLED SLUDGE-

`(A) IN GENERAL- The term `recycled sludge' means the recycled residue byproduct created in the treatment of commercial, industrial, municipal, or navigational wastewater.

`(B) RECYCLED- The term `recycled' means the processing of residue into a marketable product, but does not include incineration for the purpose of volume reduction.'.

(d) EFFECTIVE DATE- The amendments made by this section shall apply to electricity sold after the date of the enactment of this Act, in taxable years ending after such date.

TITLE XX--ALTERNATIVE MOTOR VEHICLES AND FUELS INCENTIVES

SEC. 2001. 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), and

`(3) the new qualified alternative fuel motor vehicle credit determined under subsection (d).

`(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) $4,000, 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) $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 2000 model year city fuel economy,

`(ii) $1,500, if such vehicle achieves at least 175 percent but less than 200 percent of the 2000 model year city fuel economy,

`(iii) $2,000, if such vehicle achieves at least 200 percent but less than 225 percent of the 2000 model year city fuel economy,

`(iv) $2,500, if such vehicle achieves at least 225 percent but less than 250 percent of the 2000 model year city fuel economy,

`(v) $3,000, if such vehicle achieves at least 250 percent but less than 275 percent of the 2000 model year city fuel economy,

`(vi) $3,500, if such vehicle achieves at least 275 percent but less than 300 percent of the 2000 model year city fuel economy, and

`(vii) $4,000, if such vehicle achieves at least 300 percent of the 2000 model year city fuel economy.

`(B) 2000 MODEL YEAR CITY FUEL ECONOMY- For purposes of subparagraph (A), the 2000 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:

43.7 mpg

38.3 mpg

34.1 mpg

30.7 mpg

27.9 mpg

25.6 mpg

22.0 mpg

19.3 mpg

17.2 mpg

15.5 mpg

14.1 mpg

12.9 mpg

11.9 mpg

11.1 mpg.

`(ii) In the case of a light truck:

37.6 mpg

33.7 mpg

30.6 mpg

28.0 mpg

25.9 mpg

24.1 mpg

21.3 mpg

19.0 mpg

17.3 mpg

15.8 mpg

14.6 mpg

13.6 mpg

12.8 mpg

12.0 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 or light truck and which provides the following percentage of the maximum available power:

$250

$500

$750

$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:

$1,000

$1,750

$2,000

$2,250

$2,500.

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

$4,000

$4,500

$5,000

$5,500

$6,000.

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

$6,000

$7,000

$8,000

$9,000

$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 2000 model year city fuel economy,

`(II) $1,000, if such vehicle achieves at least 150 percent but less than 175 percent of the 2000 model year city fuel economy,

`(III) $1,500, if such vehicle achieves at least 175 percent but less than 200 percent of the 2000 model year city fuel economy,

`(IV) $2,000, if such vehicle achieves at least 200 percent but less than 225 percent of the 2000 model year city fuel economy,

`(V) $2,500, if such vehicle achieves at least 225 percent but less than 250 percent of the 2000 model year city fuel economy, and

`(VI) $3,000, if such vehicle achieves at least 250 percent of the 2000 model year city fuel economy.

`(ii) 2000 MODEL YEAR CITY FUEL ECONOMY- For purposes of clause (i), the 2000 model year city fuel economy with respect to a vehicle shall be determined 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:

The increased credit amount is:

$3,500

$3,000

$2,500

$2,000

$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:

The increased credit amount is:

$9,000

$7,750

$6,500

$5,250

$4,000.

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

The increased credit amount is:

$14,000

$12,000

$10,000

$8,000

$6,000.

`(D) DEFINITIONS-
`(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) HEAVY DUTY HYBRID MOTOR VEHICLE- For purposes of this paragraph, the term `heavy duty hybrid motor vehicle' means a new qualified hybrid motor vehicle which has a gross vehicle weight rating of more than 10,000 pounds and draws propulsion energy from both of the following onboard sources of stored energy:

`(I) An internal combustion or heat engine using consumable fuel which, for 2002 and later model vehicles, has received a certificate of conformity under the Clean Air Act and meets or exceeds a level of not greater than 3.0 grams per brake horsepower-hour of oxides of nitrogen and 0.01 per brake horsepower-hour of particulate matter.

`(II) A rechargeable energy storage system.

`(iii) MAXIMUM AVAILABLE POWER-

`(I) PASSENGER AUTOMOBILE 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 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.

`(d) NEW QUALIFIED ALTERNATIVE FUEL MOTOR VEHICLE CREDIT-

`(1) ALLOWANCE OF CREDIT- Except as provided in paragraph (5), the 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) 40 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).

`(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) QUALIFIED ALTERNATIVE FUEL MOTOR VEHICLE DEFINED- For purposes of this subsection--

`(A) IN GENERAL- The term `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.

`(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) 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.

`(f) 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', `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 September 30, 2002, 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.

`(g) 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.

`(h) 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, 2011, and

`(2) in the case of any other property, December 31, 2006.'.

(b) CONFORMING AMENDMENTS-

(1) Section 1016(a) is amended by striking `and' at the end of paragraph (27), by striking the period at the end of paragraph (28) and inserting `, and', and by adding at the end the following new paragraph:

`(29) to the extent provided in section 30B(f)(5).'.

(2) Section 55(c)(2) is amended by inserting `30B(e),' after `30(b)(3)'.

(3) Section 6501(m) is amended by inserting `30B(f)(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:

(e) EFFECTIVE DATE- The amendments made by this section shall apply to property placed in service after September 30, 2002, in taxable years ending after such date.

SEC. 2002. 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 Energy Tax Incentives Act of 2002, 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) $3,500, 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)'.

(3) Section 55(c)(2), as amended by this Act, 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- 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 September 30, 2002, 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).'.

(d) EFFECTIVE DATE- The amendments made by this section shall apply to property placed in service after September 30, 2002, in taxable years ending after such date.

SEC. 2003. 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- The credit allowed under subsection (a)--

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

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

`(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, 2011, and

`(2) in the case of any other property, after December 31, 2006.'.

(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 (28), by striking the period at the end of paragraph (29) and inserting `, and', and by adding at the end the following new paragraph:

`(30) to the extent provided in section 30C(f).'.

(2) Section 55(c)(2), as amended by this Act, 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:

(c) EFFECTIVE DATE- The amendments made by this section shall apply to property placed in service after September 30, 2002, in taxable years ending after such date.

SEC. 2004. 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 40 the following new section:

`SEC. 40A. 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 the amount determined in accordance with the following table:

30 cents

40 cents

50 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) 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.

`(d) 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.

`(e) TERMINATION- This section shall not apply to any fuel sold at retail after December 31, 2006.'.

(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 (14), by striking the period at the end of paragraph (15) and inserting `, plus', and by adding at the end the following new paragraph:

`(16) the alternative fuel retail sales credit determined under section 40A(a).'.

(c) TRANSITIONAL RULE- Section 39(d) (relating to transitional rules) is amended by adding at the end the following new paragraph:

`(11) NO CARRYBACK OF SECTION 40A CREDIT BEFORE EFFECTIVE DATE- No portion of the unused business credit for any taxable year which is attributable to the alternative fuel retail sales credit determined under section 40A(a) may be carried back to a taxable year ending before January 1, 2002.'.

(d) 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 40 the following new item:

(e) EFFECTIVE DATE- The amendments made by this section shall apply to fuel sold at retail after September 30, 2002, in taxable years ending after such date.

SEC. 2005. SMALL ETHANOL PRODUCER CREDIT.

(a) ALLOCATION OF ALCOHOL FUELS CREDIT TO PATRONS OF A COOPERATIVE- Section 40(g) (relating to alcohol used as fuel) is amended by adding at the end the following new paragraph:
`(6) ALLOCATION OF SMALL ETHANOL PRODUCER CREDIT TO PATRONS OF COOPERATIVE-
`(A) ELECTION TO ALLOCATE-
`(i) IN GENERAL- In the case of a cooperative organization described in section 1381(a), any portion of the credit determined under subsection (a)(3) for the taxable year may, at the election of the organization, be apportioned pro rata among patrons of the organization on the basis of the quantity or value of business done with or for such patrons for the taxable year.

`(ii) FORM AND EFFECT OF ELECTION- An election under clause (i) for any taxable year shall be made on a timely filed return for such year. Such election, once made, shall be irrevocable for such taxable year.

`(B) TREATMENT OF ORGANIZATIONS AND PATRONS- The amount of the credit apportioned to patrons under subparagraph (A)--

`(i) shall not be included in the amount determined under subsection (a) with respect to the organization for the taxable year,

`(ii) shall be included in the amount determined under subsection (a) for the taxable year of each patron for which the patronage dividends for the taxable year described in subparagraph (A) are included in gross income, and

`(iii) shall be included in gross income of such patrons for the taxable year in the manner and to the extent provided in section 87.

`(C) SPECIAL RULES FOR DECREASE IN CREDITS FOR TAXABLE YEAR- If the amount of the credit of a cooperative organization determined under subsection (a)(3) for a taxable year is less than the amount of such credit shown on the return of the cooperative organization for such year, an amount equal to the excess of--

`(i) such reduction, over

`(ii) the amount not apportioned to such patrons under subparagraph (A) for the taxable year,

shall be treated as an increase in tax imposed by this chapter on the organization. Such increase shall not be treated as tax imposed by this chapter for purposes of determining the amount of any credit under this chapter or for purposes of section 55.'.

(b) IMPROVEMENTS TO SMALL ETHANOL PRODUCER CREDIT-

(1) DEFINITION OF SMALL ETHANOL PRODUCER- Section 40(g) (relating to definitions and special rules for eligible small ethanol producer credit) is amended by striking `30,000,000' each place it appears and inserting `60,000,000'.

(2) SMALL ETHANOL PRODUCER CREDIT NOT A PASSIVE ACTIVITY CREDIT- Clause (i) of section 469(d)(2)(A) is amended by striking `subpart D' and inserting `subpart D, other than section 40(a)(3),'.

(3) ALLOWING CREDIT AGAINST ENTIRE REGULAR TAX AND MINIMUM TAX-

(A) IN GENERAL- Subsection (c) of section 38 (relating to limitation based on amount of tax), as amended by section 301(b) of the Job Creation and Worker Assistance Act of 2002, is amended by redesignating paragraph (4) as paragraph (5) and by inserting after paragraph (3) the following new paragraph:

`(4) SPECIAL RULES FOR SMALL ETHANOL PRODUCER CREDIT-

`(A) IN GENERAL- In the case of the small ethanol producer 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) the amounts in subparagraphs (A) and (B) thereof shall be treated as being zero, 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 small ethanol producer credit).

`(B) SMALL ETHANOL PRODUCER CREDIT- For purposes of this subsection, the term `small ethanol producer credit' means the credit allowable under subsection (a) by reason of section 40(a)(3).'.

(B) CONFORMING AMENDMENTS- Subclause (II) of section 38(c)(2)(A)(ii), as amended by section 301(b)(2) of the Job Creation and Worker Assistance Act of 2002, and subclause (II) of section 38(c)(3)(A)(ii), as added by section 301(b)(1) of such Act, are each amended by inserting `or the small ethanol producer credit' after `employee credit'.

(4) SMALL ETHANOL PRODUCER CREDIT NOT ADDED BACK TO INCOME UNDER SECTION 87- Section 87 (relating to income inclusion of alcohol fuel credit) is amended to read as follows:

`SEC. 87. ALCOHOL FUEL CREDIT.

`Gross income includes an amount equal to the sum of--
`(1) the amount of the alcohol mixture credit determined with respect to the taxpayer for the taxable year under section 40(a)(1), and

`(2) the alcohol credit determined with respect to the taxpayer for the taxable year under section 40(a)(2).'.

(c) CONFORMING AMENDMENT- Section 1388 (relating to definitions and special rules for cooperative organizations) is amended by adding at the end the following new subsection:

`(k) CROSS REFERENCE- For provisions relating to the apportionment of the alcohol fuels credit between cooperative organizations and their patrons, see section 40(g)(6).'.

(d) EFFECTIVE DATE- The amendments made by this section shall apply to taxable years beginning after the date of the enactment of this Act.

SEC. 2006. ALL ALCOHOL FUELS TAXES TRANSFERRED TO HIGHWAY TRUST FUND.

(a) IN GENERAL- Section 9503(b)(4) (relating to certain taxes not transferred to Highway Trust Fund) is amended--
(1) by adding `or' at the end of subparagraph (C),

(2) by striking the comma at the end of subparagraph (D)(iii) and inserting a period, and

(3) by striking subparagraphs (E) and (F).

(b) EFFECTIVE DATE- The amendments made by this section shall apply to taxes imposed after September 30, 2003.

SEC. 2007. INCREASED FLEXIBILITY IN ALCOHOL FUELS TAX CREDIT.

(a) ALCOHOL FUELS CREDIT MAY BE TRANSFERRED- Section 40 (relating to alcohol used as fuel) is amended by adding at the end the following new subsection:

`(i) CREDIT MAY BE TRANSFERRED-

`(1) IN GENERAL- A taxpayer may transfer any credit allowable under paragraph (1) or (2) of subsection (a) with respect to alcohol used in the production of ethyl tertiary butyl ether through an assignment to a qualified assignee. Such transfer may be revoked only with the consent of the Secretary.

`(2) QUALIFIED ASSIGNEE- For purposes of this subsection, the term `qualified assignee' means any person who--

`(A) is liable for taxes imposed under section 4081,

`(B) is required to register under section 4101, and

`(C) obtains a certificate from the taxpayer described in paragraph (1) which identifies the amount of alcohol used in such production.

`(3) REGULATIONS- The Secretary shall prescribe such regulations as necessary to insure that any credit described in paragraph (1) is claimed once and not reassigned by a qualified assignee.'.

(b) ALCOHOL FUELS CREDIT MAY BE TAKEN AGAINST MOTOR FUELS TAX LIABILITY-

(1) IN GENERAL- Subpart C of part III of subchapter A of chapter 32 (relating to special provisions applicable to petroleum products) is amended by adding at the end the following new section:

`SEC. 4104. CREDIT AGAINST MOTOR FUELS TAXES.

`(a) ELECTION TO USE CREDIT AGAINST MOTOR FUELS TAXES- There is hereby allowed as a credit against the taxes imposed by section 4081, any credit allowed under paragraph (1) or (2) of section 40(a) with respect to alcohol used in the production of ethyl tertiary butyl ether to the extent--
`(1) such credit is not claimed by the taxpayer or the qualified assignee under section 40(i) as a credit under section 40, and

`(2) the taxpayer or qualified assignee elects to claim such credit under this section.

`(b) ELECTION IRREVOCABLE- Any election under subsection (a) shall be irrevocable.

`(c) REQUIRED STATEMENT- Any return claiming a credit pursuant to an election under this section shall be accompanied by a statement that the credit was not, and will not, be claimed on an income tax return.

`(d) REGULATIONS- The Secretary shall prescribe such regulations as necessary to avoid the claiming of double benefits and to prescribe the taxable periods with respect to which the credit may be claimed.'.

(2) CONFORMING AMENDMENT- Section 40(c) is amended by striking `or section 4091(c)' and inserting `section 4091(c), or section 4104'.

(3) CLERICAL AMENDMENT- The table of sections for subpart C of part III of subchapter A of chapter 32 is amended by adding at the end the following new item:

`Sec. 4104. Credit against motor fuels taxes.'.

(c) EFFECTIVE DATE- The amendments made by this section shall take effect on and after the date of the enactment of this Act.

SEC. 2008. INCENTIVES FOR BIODIESEL.

(a) CREDIT FOR BIODIESEL USED AS A FUEL-
(1) IN GENERAL- Subpart D of part IV of subchapter A of chapter 1 (relating to business related credits), as amended by this Act, is amended by inserting after section 40A the following new section:

`SEC. 40B. BIODIESEL USED AS FUEL.

`(a) GENERAL RULE- For purposes of section 38, the biodiesel fuels credit determined under this section for the taxable year is an amount equal to the biodiesel mixture credit.

`(b) DEFINITION OF BIODIESEL MIXTURE CREDIT- For purposes of this section--

`(1) BIODIESEL MIXTURE CREDIT-
`(A) IN GENERAL- The biodiesel mixture credit of any taxpayer for any taxable year is the sum of the products of the biodiesel mixture rate for each qualified biodiesel mixture and the number of gallons of such mixture of the taxpayer for the taxable year.

`(B) BIODIESEL MIXTURE RATE- For purposes of subparagraph (A), the biodiesel mixture rate for each qualified biodiesel mixture shall be--

`(i) in the case of a mixture with only biodiesel V, 1 cent for each whole percentage point (not exceeding 20 percentage points) of biodiesel V in such mixture, and

`(ii) in the case of a mixture with biodiesel NV, or a combination of biodiesel V and biodiesel NV, 0.5 cent for each whole percentage point (not exceeding 20 percentage points) of such biodiesel in such mixture.

`(2) QUALIFIED BIODIESEL MIXTURE-

`(A) IN GENERAL- The term `qualified biodiesel mixture' means a mixture of diesel and biodiesel V or biodiesel NV which--
`(i) is sold by the taxpayer producing such mixture to any person for use as a fuel, or

`(ii) is used as a fuel by the taxpayer producing such mixture.

`(B) SALE OR USE MUST BE IN TRADE OR BUSINESS, ETC-

`(i) IN GENERAL- Biodiesel V or biodiesel NV used in the production of a qualified biodiesel mixture shall be taken into account--
`(I) only if the sale or use described in subparagraph (A) is in a trade or business of the taxpayer, and

`(II) for the taxable year in which such sale or use occurs.

`(ii) CERTIFICATION FOR BIODIESEL V- Biodiesel V used in the production of a qualified biodiesel mixture shall be taken into account only if the taxpayer described in subparagraph (A) obtains a certification from the producer of the biodiesel V which identifies the product produced.

`(C) CASUAL OFF-FARM PRODUCTION NOT ELIGIBLE- No credit shall be allowed under this section with respect to any casual off-farm production of a qualified biodiesel mixture.

`(c) COORDINATION WITH EXEMPTION FROM EXCISE TAX- The amount of the credit determined under this section with respect to any biodiesel V shall, under regulations prescribed by the Secretary, be properly reduced to take into account any benefit provided with respect to such biodiesel V solely by reason of the application of section 4041(n) or section 4081(f).

`(d) DEFINITIONS AND SPECIAL RULES- For purposes of this section--

`(1) BIODIESEL V DEFINED- The term `biodiesel V' means the monoalkyl esters of long chain fatty acids derived solely from virgin vegetable oils for use in compressional-ignition (diesel) engines. Such term shall include esters derived from vegetable oils from corn, soybeans, sunflower seeds, cottonseeds, canola, crambe, rapeseeds, safflowers, flaxseeds, rice bran, and mustard seeds.

`(2) BIODIESEL NV DEFINED- The term `biodiesel nv' means the monoalkyl esters of long chain fatty acids derived from nonvirgin vegetable oils or animal fats for use in compressional-ignition (diesel) engines.

`(3) REGISTRATION REQUIREMENTS- The terms `biodiesel V' and `biodiesel NV' shall only include a biodiesel which meets--

`(i) the registration requirements for fuels and fuel additives established by the Environmental Protection Agency under section 211 of the Clean Air Act (42 U.S.C. 7545), and

`(ii) the requirements of the American Society of Testing and Materials D6751.

`(2) BIODIESEL MIXTURE NOT USED AS A FUEL, ETC-

`(A) IMPOSITION OF TAX- If--
`(i) any credit was determined under this section with respect to biodiesel V or biodiesel NV used in the production of any qualified biodiesel mixture, and

`(ii) any person--

`(I) separates such biodiesel from the mixture, or

`(II) without separation, uses the mixture other than as a fuel,

then there is hereby imposed on such person a tax equal to the product of the biodiesel mixture rate applicable under subsection (b)(1)(B) and the number of gallons of the mixture.

`(B) APPLICABLE LAWS- All provisions of law, including penalties, shall, insofar as applicable and not inconsistent with this section, apply in respect of any tax imposed under subparagraph (A) as if such tax were imposed by section 4081 and not by this chapter.

`(3) 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.

`(e) ELECTION TO HAVE BIODIESEL FUELS CREDIT NOT APPLY-

`(1) IN GENERAL- A taxpayer may elect to have this section not apply for any taxable year.

`(2) TIME FOR MAKING ELECTION- An election under paragraph (1) for any taxable year may be made (or revoked) at any time before the expiration of the 3-year period beginning on the last date prescribed by law for filing the return for such taxable year (determined without regard to extensions).

`(3) MANNER OF MAKING ELECTION- An election under paragraph (1) (or revocation thereof) shall be made in such manner as the Secretary may by regulations prescribe.'.

`(f) TERMINATION- This section shall not apply to any fuel sold after December 31, 2005.'.

(2) CREDIT TREATED AS PART OF GENERAL BUSINESS CREDIT- Section 38(b), as amended by this Act, is amended by striking `plus' at the end of paragraph (15), by striking the period at the end of paragraph (16) and inserting `, plus', and by adding at the end the following new paragraph:

`(17) the biodiesel fuels credit determined under section 40B(a).'.

(3) CONFORMING AMENDMENTS-

(A) Section 39(d), as amended by this Act, is amended by adding at the end the following new paragraph:

`(12) NO CARRYBACK OF BIODIESEL FUELS CREDIT BEFORE JANUARY 1, 2003- No portion of the unused business credit for any taxable year which is attributable to the biodiesel fuels credit determined under section 40B may be carried back to a taxable year beginning before January 1, 2003.'.

(B) Section 196(c) is amended by striking `and' at the end of paragraph (9), by striking the period at the end of paragraph (10), and by adding at the end the following new paragraph:

`(11) the biodiesel fuels credit determined under section 40B(a).'.

(C) Section 6501(m), as amended by this Act, is amended by inserting `40B(e),' after `40(f),'.

(D) The table of sections for subpart D of part IV of subchapter A of chapter 1, as amended by this Act, is amended by adding after the item relating to section 40A the following new item:

`Sec. 40B. Biodiesel used as fuel.'.

(4) EFFECTIVE DATE- The amendments made by this subsection shall apply to taxable years beginning after December 31, 2002.

(b) REDUCTION OF MOTOR FUEL EXCISE TAXES ON BIODIESEL V MIXTURES-

(1) IN GENERAL- Section 4081 (relating to manufacturers tax on petroleum products) is amended by adding at the end the following new subsection:

`(f) BIODIESEL V MIXTURES- Under regulations prescribed by the Secretary--

`(1) IN GENERAL- In the case of the removal or entry of a qualified biodiesel mixture with biodiesel V, the rate of tax under subsection (a) shall be the otherwise applicable rate reduced by the biodiesel mixture rate (if any) applicable to the mixture.

`(2) TAX PRIOR TO MIXING-

`(A) IN GENERAL- In the case of the removal or entry of diesel fuel for use in producing at the time of such removal or entry a qualified biodiesel mixture with biodiesel V, the rate of tax under subsection (a) shall be the rate determined under subparagraph (B).

`(B) DETERMINATION OF RATE- For purposes of subparagraph (A), the rate determined under this subparagraph is the rate determined under paragraph (1), divided by a percentage equal to 100 percent minus the percentage of biodiesel V which will be in the mixture.

`(3) DEFINITIONS- For purposes of this subsection, any term used in this subsection which is also used in section 40B shall have the meaning given such term by section 40B.

`(4) CERTAIN RULES TO APPLY- Rules similar to the rules of paragraphs (6) and (7) of subsection (c) shall apply for purposes of this subsection.'.

(2) CONFORMING AMENDMENTS-

(A) Section 4041 is amended by adding at the end the following new subsection:

`(n) BIODIESEL V MIXTURES- Under regulations prescribed by the Secretary, in the case of the sale or use of a qualified biodiesel mixture (as defined in section 40B(b)(2)) with biodiesel V, the rates under paragraphs (1) and (2) of subsection (a) shall be the otherwise applicable rates, reduced by any applicable biodiesel mixture rate (as defined in section 40B(b)(1)(B)).'.

(B) Section 6427 is amended by redesignating subsection (p) as subsection (q) and by inserting after subsection (o) the following new subsection:

`(p) BIODIESEL V MIXTURES- Except as provided in subsection (k), if any diesel fuel on which tax was imposed by section 4081 at a rate not determined under section 4081(f) is used by any person in producing a qualified biodiesel mixture (as defined in section 40B(b)(2)) with biodiesel V which is sold or used in such person's trade or business, the Secretary shall pay (without interest) to such person an amount equal to the per gallon applicable biodiesel mixture rate (as defined in section 40B(b)(1)(B)) with respect to such fuel.'.

(3) EFFECTIVE DATE- The amendments made by this subsection shall apply to any fuel sold after December 31, 2002, and before January 1, 2006.

(c) HIGHWAY TRUST FUND HELD HARMLESS- There are hereby transferred (from time to time) from the funds of the Commodity Credit Corporation amounts determined by the Secretary of the Treasury to be equivalent to the reductions that would occur (but for this subsection) in the receipts of the Highway Trust Fund by reason of the amendments made by this section.

SEC. 2009. CREDIT FOR TAXPAYERS OWNING COMMERCIAL POWER TAKEOFF VEHICLES.

(a) IN GENERAL- Subpart D of part IV of subchapter A of chapter 1 (relating to business-related credits), as amended by this Act, is amended by adding at the end the following new section:

`SEC. 45N. COMMERCIAL POWER TAKEOFF VEHICLES CREDIT.

`(a) GENERAL RULE- For purposes of section 38, the amount of the commercial power takeoff vehicles credit determined under this section for the taxable year is $250 for each qualified commercial power takeoff vehicle owned by the taxpayer as of the close of the calendar year in which or with which the taxable year of the taxpayer ends.

`(b) DEFINITIONS- For purposes of this section--

`(1) QUALIFIED COMMERCIAL POWER TAKEOFF VEHICLE- The term `qualified commercial power takeoff vehicle' means any highway vehicle described in paragraph (2) which is propelled by any fuel subject to tax under section 4041 or 4081 if such vehicle is used in a trade or business or for the production of income (and is licensed and insured for such use).

`(2) HIGHWAY VEHICLE DESCRIBED- A highway vehicle is described in this paragraph if such vehicle is--

`(A) designed to engage in the daily collection of refuse or recyclables from homes or businesses and is equipped with a mechanism under which the vehicle's propulsion engine provides the power to operate a load compactor, or

`(B) designed to deliver ready mixed concrete on a daily basis and is equipped with a mechanism under which the vehicle's propulsion engine provides the power to operate a mixer drum to agitate and mix the product en route to the delivery site.

`(c) EXCEPTION FOR VEHICLES USED BY GOVERNMENTS, ETC- No credit shall be allowed under this section for any vehicle owned by any person at the close of a calendar year if such vehicle is used at any time during such year by--

`(1) the United States or an agency or instrumentality thereof, a State, a political subdivision of a State, or an agency or instrumentality of one or more States or political subdivisions, or

`(2) an organization exempt from tax under section 501(a).

`(d) DENIAL OF DOUBLE BENEFIT- The amount of any deduction under this subtitle for any tax imposed by subchapter B of chapter 31 or part III of subchapter A of chapter 32 for any taxable year shall be reduced (but not below zero) by the amount of the credit determined under this subsection for such taxable year.

`(e) TERMINATION- This section shall not apply with respect to any calendar year after 2004.'.

(b) CREDIT MADE PART OF GENERAL BUSINESS CREDIT- Subsection (b) of section 38 (relating to general business credit), as amended by this Act, 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 new paragraph:

`(24) the commercial power takeoff vehicles credit under section 45N(a).'.

(c) CLERICAL AMENDMENT- The table of sections for subpart D of part IV of subchapter A of chapter 1, as amended by this Act, is amended by adding at the end the following new item:

`Sec. 45N. Commercial power takeoff vehicles credit.'.

(d) REGULATIONS- Not later than January 1, 2005, the Secretary of the Treasury, in consultation with the Secretary of Energy, shall by regulation provide for the method of determining the exemption from any excise tax imposed under section 4041 or 4081 of the Internal Revenue Code of 1986 on fuel used through a mechanism to power equipment attached to a highway vehicle as described in section 45N(b)(2) of such Code, as added by subsection (a).

(e) EFFECTIVE DATE- The amendments made by this section shall apply to taxable years beginning after the date of the enactment of this Act.

SEC. 2010. MODIFICATIONS TO THE INCENTIVES FOR ALTERNATIVE VEHICLES AND FUELS.

(a) MODIFICATION TO NEW QUALIFIED HYBRID MOTOR VEHICLE CREDIT- The table in section 30B(c)(2)(A) of the Internal Revenue Code of 1986, as added by this Act, is amended by striking `5 percent' and inserting `4 percent'.

(b) MODIFICATIONS TO EXTENSION OF DEDUCTION FOR CERTAIN REFUELING PROPERTY-

(1) IN GENERAL- Subsection (f) of section 179A of the Internal Revenue Code of 1986 is amended to read as follows:

`(f) TERMINATION- This section shall not apply to any property placed in service--

`(1) in the case of property relating to hydrogen, after December 31, 2011, and

`(2) in the case of any other property, after December 31, 2007.'.

(2) EXTENSION OF PHASEOUT- Section 179A(b)(1)(B) of such Code, as amended by section 606(a) of the Job Creation and Worker Assistance Act of 2002, is amended--

(A) by striking `calendar year 2004' in clause (i) and inserting `calendar years 2004 and 2005 (calendar years 2004 through 2009 in the case of property relating to hydrogen) ',

(B) by striking `2005' in clause (ii) and inserting `2006 (calendar year 2010 in the case of property relating to hydrogen)', and

(C) by striking `2006' in clause (iii) and inserting `2007 (calendar year 2011 in the case of property relating to hydrogen)'.

(3) EFFECTIVE DATE- The amendments made by this subsection shall apply to property placed in service after December 31, 2003, in taxable years ending after such date.

(c) MODIFICATION TO CREDIT FOR INSTALLATION OF ALTERNATIVE FUELING STATIONS- Subsection (l) of section 30C of the Internal Revenue Code of 1986, as added by this Act, is amended to read as follows:

`(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, 2011, and

`(2) in the case of any other property, after December 31, 2007.'.

(d) EFFECTIVE DATE- Except as provided in subsection (b)(3), the amendments made by this section shall apply to property placed in service after September 30, 2002, in taxable years ending after such date.

TITLE XXI--CONSERVATION AND ENERGY EFFICIENCY PROVISIONS

SEC. 2101. CREDIT FOR CONSTRUCTION OF NEW ENERGY EFFICIENT HOME.

(a) IN GENERAL- Subpart D of part IV of subchapter A of chapter 1 (relating to business related credits), as amended by this Act, is amended by adding at the end the following new section:

`SEC. 45G. NEW 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 aggregate adjusted bases of all energy efficient property installed in a qualifying new home during construction of such home.

`(b) LIMITATIONS-

`(1) MAXIMUM CREDIT-
`(A) IN GENERAL- The credit allowed by this section with respect to a qualifying new home shall not exceed--
`(i) in the case of a 30-percent home, $1,250, and

`(ii) in the case of a 50-percent home, $2,000.

`(B) 30- OR 50-PERCENT HOME- For purposes of subparagraph (A)--

`(i) 30-PERCENT HOME- The term `30-percent home' means a qualifying new home which is certified to have a projected level of annual heating and cooling energy consumption, measured in terms of average annual energy cost to the homeowner, which is at least 30 percent less than the annual level of heating and cooling energy consumption of a reference qualifying new home constructed in accordance with the standards of chapter 4 of the 2000 International Energy Conservation Code, or a qualifying new home which is a manufactured home which meets the applicable standards of the Energy Star program managed jointly by the Environmental Protection Agency and the Department of Energy.

`(ii) 50-PERCENT HOME- The term `50-percent home' means a qualifying new home which is certified to have a projected level of annual heating and cooling energy consumption, measured in terms of average annual energy cost to the homeowner, which is at least 50 percent less than such annual level of heating and cooling energy consumption.

`(C) PRIOR CREDIT AMOUNTS ON SAME HOME TAKEN INTO ACCOUNT- If a credit was allowed under subsection (a) with respect to a qualifying new home in 1 or more prior taxable years, the amount of the credit otherwise allowable for the taxable year with respect to that home shall not exceed the amount under clause (i) or (ii) of subparagraph (A) (as the case may be), reduced by the sum of the credits allowed under subsection (a) with respect to the home for all prior taxable years.

`(2) COORDINATION WITH REHABILITATION AND ENERGY CREDITS- For purposes of this section--

`(A) the basis of any property referred to in subsection (a) shall be reduced by that portion of the basis of any property which is attributable to the rehabilitation credit (as determined under section 47(a)) or to the energy percentage of energy property (as determined under section 48(a)), and

`(B) expenditures taken into account under either section 47 or 48(a) shall not be taken into account under this section.

`(c) DEFINITIONS- For purposes of this section--

`(1) ELIGIBLE CONTRACTOR- The term `eligible contractor' means the person who constructed the qualifying new 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) ENERGY EFFICIENT PROPERTY- The term `energy efficient property' means any energy efficient building envelope component, and any energy efficient heating or cooling equipment which can, individually or in combination with other components, meet the requirements of this section.

`(3) QUALIFYING NEW HOME- The term `qualifying new home' means a dwelling--

`(A) located in the United States,

`(B) the construction of which is substantially completed after the date of the enactment of this section, and

`(C) the first use of which after construction is as a principal residence (within the meaning of section 121).

`(4) CONSTRUCTION- The term `construction' includes reconstruction and rehabilitation.

`(5) BUILDING ENVELOPE COMPONENT- The term `building envelope component' means--

`(A) any insulation material or system which is specifically and primarily designed to reduce the heat loss or gain of a qualifying new home when installed in or on such home, and

`(B) exterior windows (including skylights) and doors.

`(6) MANUFACTURED HOME INCLUDED- The term `qualifying new home' includes a manufactured home conforming to Federal Manufactured Home Construction and Safety Standards (24 C.F.R. 3280).

`(d) CERTIFICATION-

`(1) METHOD OF CERTIFICATION-
`(A) IN GENERAL- A certification described in subsection (b)(1)(B) shall be determined either by a component-based method or a performance-based method.

`(B) COMPONENT-BASED METHOD- A component-based method is a method which uses the applicable technical energy efficiency specifications or ratings (including product labeling requirements) for the energy efficient building envelope component or energy efficient heating or cooling equipment. The Secretary shall, in consultation with the Administrator of the Environmental Protection Agency, develop prescriptive component-based packages that are equivalent in energy performance to properties that qualify under subparagraph (C).

`(C) PERFORMANCE-BASED METHOD-

`(i) IN GENERAL- A performance-based method is a method which calculates projected energy usage and cost reductions in the qualifying new home in relation to a reference qualifying new home--
`(I) heated by the same energy source and heating system type, and

`(II) constructed in accordance with the standards of chapter 4 of the 2000 International Energy Conservation Code.

`(ii) COMPUTER SOFTWARE- Computer software shall be used in support of a performance-based method certification under clause (i). Such software shall meet procedures and methods for calculating energy and cost savings in regulations promulgated by the Secretary of Energy. Such regulations on the specifications for software and verification protocols shall be based on the 2001 California Residential Alternative Calculation Method Approval Manual.

`(2) PROVIDER- A certification described in subsection (b)(1)(B) shall be provided by--

`(A) in the case of a component-based method, a local building regulatory authority, a utility, a manufactured home production inspection primary inspection agency (IPIA), or a home energy rating organization, or

`(B) in the case of a performance-based method, an individual recognized by an organization designated by the Secretary for such purposes.

`(3) FORM-

`(A) IN GENERAL- A certification described in subsection (b)(1)(B) shall be made in writing in a manner that specifies in readily verifiable fashion the energy efficient building envelope components and energy efficient heating or cooling equipment installed and their respective rated energy efficiency performance, and in the case of a performance-based method, accompanied by a written analysis documenting the proper application of a permissible energy performance calculation method to the specific circumstances of such qualifying new home.

`(B) FORM PROVIDED TO BUYER- A form documenting the energy efficient building envelope components and energy efficient heating or cooling equipment installed and their rated energy efficiency performance shall be provided to the buyer of the qualifying new home. 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.

`(C) RATINGS LABEL AFFIXED IN DWELLING- A permanent label documenting the ratings in subparagraph (B) shall be affixed to the front of the electrical distribution panel of the qualifying new home, or shall be otherwise permanently displayed in a readily inspectable location in such home.

`(4) REGULATIONS-

`(A) IN GENERAL- In prescribing regulations under this subsection for performance-based certification methods, the Secretary, 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, shall prescribe procedures for calculating annual energy usage and cost reductions for heating and cooling and for the reporting of the results. Such regulations shall--
`(i) provide that any calculation procedures be fuel neutral such that the same energy efficiency measures allow a qualifying new home to be eligible for the credit under this section regardless of whether such home uses a gas or oil furnace or boiler or an electric heat pump, and

`(ii) require that any computer software allow for the printing of the Federal tax forms necessary for the credit under this section and for the printing of forms for disclosure to the homebuyer.

`(B) PROVIDERS- For purposes of paragraph (2)(B), the Secretary shall establish requirements for the designation of individuals based on the requirements for energy consultants and home energy raters specified by the Mortgage Industry National Accreditation Procedures for Home Energy Rating Systems.

`(e) TERMINATION- Subsection (a) shall apply to qualifying new homes purchased during the period beginning on the date of the enactment of this section and ending on December 31, 2007.'.

(b) CREDIT MADE PART OF GENERAL BUSINESS CREDIT- Subsection (b) of section 38 (relating to current year business credit), as amended by this Act, is amended by striking `plus' at the end of paragraph (16), by striking the period at the end of paragraph (17) and inserting `, plus', and by adding at the end the following new paragraph:

`(18) the new energy efficient home credit determined under section 45G(a).'.

(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 new subsection:

`(d) NEW ENERGY EFFICIENT HOME EXPENSES- No deduction shall be allowed for that portion of expenses for a qualifying new 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 45G(a).'.

(d) LIMITATION ON CARRYBACK- Subsection (d) of section 39, as amended by this Act, is amended by adding at the end the following new paragraph:

`(13) NO CARRYBACK OF NEW ENERGY EFFICIENT HOME CREDIT BEFORE EFFECTIVE DATE- No portion of the unused business credit for any taxable year which is attributable to the credit determined under section 45G may be carried back to any taxable year ending on or before the date of the enactment of section 45G.'.

(e) DEDUCTION FOR CERTAIN UNUSED BUSINESS CREDITS- Subsection (c) of section 196, as amended by this Act, is amended by striking `and' at the end of paragraph (10), by striking the period at the end of paragraph (11) and inserting `, and', and by adding after paragraph (11) the following new paragraph:

`(12) the new energy efficient home credit determined under section 45G(a).'.

(f) CLERICAL AMENDMENT- The table of sections for subpart D of part IV of subchapter A of chapter 1, as amended by this Act, is amended by adding at the end the following new item:

`Sec. 45G. New energy efficient home credit.'.

(g) EFFECTIVE DATE- The amendments made by this section shall apply to taxable years ending after the date of the enactment of this Act.

SEC. 2102. CREDIT FOR ENERGY EFFICIENT APPLIANCES.

(a) IN GENERAL- Subpart D of part IV of subchapter A of chapter 1 (relating to business-related credits), as amended by this Act, is amended by adding at the end the following new section:

`SEC. 45H. 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 the eligible production of qualified energy efficient appliances produced by the taxpayer during the calendar year ending with or within the taxable year.

`(b) APPLICABLE AMOUNT; ELIGIBLE PRODUCTION- For purposes of subsection (a)--

`(1) APPLICABLE AMOUNT- The applicable amount is--
`(A) $50, in the case of--
`(i) a clothes washer which is manufactured with at least a 1.26 MEF, or

`(ii) a refrigerator which consumes at least 10 percent less kWh per year than the energy conservation standards for refrigerators promulgated by the Department of Energy effective July 1, 2001, and

`(B) $100, in the case of--

`(i) a clothes washer which is manufactured with at least a 1.42 MEF (at least 1.5 MEF for washers produced after 2004), or

`(ii) a refrigerator which consumes at least 15 percent less kWh per year than such energy conservation standards.

`(2) ELIGIBLE PRODUCTION-

`(A) IN GENERAL- The eligible production of each category of qualified energy efficient appliances is the excess of--
`(i) the number of appliances in such category which are produced by the taxpayer during such calendar year, over

`(ii) the average number of appliances in such category which were produced by the taxpayer during calendar years 1999, 2000, and 2001.

`(B) CATEGORIES- For purposes of subparagraph (A), the categories are--

`(i) clothes washers described in paragraph (1)(A)(i),

`(ii) clothes washers described in paragraph (1)(B)(i),

`(iii) refrigerators described in paragraph (1)(A)(ii), and

`(iv) refrigerators described in paragraph (1)(B)(ii).

`(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)(A), and

`(B) $30,000,000 with respect to the credit determined under subsection (b)(1)(B).

`(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) DEFINITIONS- For purposes of this section--

`(1) QUALIFIED ENERGY EFFICIENT APPLIANCE- The term `qualified energy efficient appliance' means--
`(A) a clothes washer described in subparagraph (A)(i) or (B)(i) of subsection (b)(1), or

`(B) a refrigerator described in subparagraph (A)(ii) or (B)(ii) of subsection (b)(1).

`(2) CLOTHES WASHER- The term `clothes washer' means a residential clothes washer, including a residential style coin operated washer.

`(3) REFRIGERATOR- The term `refrigerator' means an automatic defrost refrigerator-freezer which has an internal volume of at least 16.5 cubic feet.

`(4) MEF- The term `MEF' means Modified Energy Factor (as determined by the Secretary of Energy).

`(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 1 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--

`(1) with respect to refrigerators described in subsection (b)(1)(A)(ii) produced after December 31, 2004, and

`(2) with respect to all other qualified energy efficient appliances produced after December 31, 2006.'.

(b) LIMITATION ON CARRYBACK- Section 39(d) (relating to transition rules), as amended by this Act, is amended by adding at the end the following new paragraph:

`(14) NO CARRYBACK OF ENERGY EFFICIENT APPLIANCE CREDIT BEFORE EFFECTIVE DATE- No portion of the unused business credit for any taxable year which is attributable to the energy efficient appliance credit determined under section 45H may be carried to a taxable year ending before January 1, 2003.'.

(c) CONFORMING AMENDMENT- Section 38(b) (relating to general business credit), as amended by this Act, is amended by striking `plus' at the end of paragraph (17), by striking the period at the end of paragraph (18) and inserting `, plus', and by adding at the end the following new paragraph:

`(19) the energy efficient appliance credit determined under section 45H(a).'.

(d) CLERICAL AMENDMENT- The table of sections for subpart D of part IV of subchapter A of chapter 1, as amended by this Act, is amended by adding at the end the following new item:

`Sec. 45H. Energy efficient appliance credit.'.

(e) EFFECTIVE DATE- The amendments made by this section shall apply to appliances produced after December 31, 2002, in taxable years ending after such date.

SEC. 2103. CREDIT FOR RESIDENTIAL ENERGY EFFICIENT PROPERTY.

(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 new section:

`SEC. 25C. RESIDENTIAL ENERGY EFFICIENT PROPERTY.

`(a) ALLOWANCE OF CREDIT- In the case of an individual, there shall be allowed as a credit against the tax imposed by this chapter for the taxable year an amount equal to the sum of--
`(1) 15 percent of the qualified photovoltaic property expenditures made by the taxpayer during such year,

`(2) 15 percent of the qualified solar water heating property expenditures made by the taxpayer during such year,

`(3) 30 percent of the qualified fuel cell property expenditures made by the taxpayer during such year,

`(4) 30 percent of the qualified wind energy property expenditures made by the taxpayer during such year, and

`(5) the sum of the qualified Tier 2 energy efficient building property expenditures made by the taxpayer during such year.

`(b) LIMITATIONS-

`(1) MAXIMUM CREDIT- The credit allowed under subsection (a) shall not exceed--
`(A) $2,000 for property described in subsection (d)(1),

`(B) $2,000 for property described in subsection (d)(2),

`(C) $1,000 for each kilowatt of capacity of property described in subsection (d)(4),

`(D) $2,000 for property described in subsection (d)(5), and

`(E) for property described in subsection (d)(6)--

`(i) $75 for each electric heat pump water heater,

`(ii) $250 for each electric heat pump,

`(iii) $250 for each advanced natural gas furnace,

`(iv) $250 for each central air conditioner,

`(v) $75 for each natural gas water heater, and

`(vi) $250 for each geothermal heat pump.

`(2) 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 non-profit Solar Rating Certification Corporation or a comparable entity endorsed by the government of the State in which such property is installed,

`(B) in the case of a photovoltaic property, a fuel cell property, or a wind energy property, such property meets appropriate fire and electric code requirements, and

`(C) in the case of property described in subsection (d)(6), such property 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)--

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

`(II) do not require ratings to be based on certified data of the Air Conditioning and Refrigeration Institute, and

`(iii) are in effect at the time of the acquisition of the property.

`(c) CARRYFORWARD OF UNUSED CREDIT- If the credit allowable under subsection (a) exceeds the limitation imposed by section 26(a) for such taxable year reduced by the sum of the credits allowable under this subpart (other than this section and section 25D), such excess shall be carried to the succeeding taxable year and added to the credit allowable under subsection (a) for such succeeding taxable year.

`(d) DEFINITIONS- For purposes of this section--

`(1) QUALIFIED SOLAR WATER HEATING PROPERTY EXPENDITURE- The term `qualified solar water heating property expenditure' means an expenditure for property to heat water for use in a dwelling unit located in the United States and used as a residence by the taxpayer if at least half of the energy used by such property for such purpose is derived from the sun.

`(2) QUALIFIED PHOTOVOLTAIC PROPERTY EXPENDITURE- The term `qualified photovoltaic property expenditure' means an expenditure for property that uses solar energy to generate electricity for use in such a dwelling unit.

`(3) 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.

`(4) QUALIFIED FUEL CELL PROPERTY EXPENDITURE- The term `qualified fuel cell property expenditure' means an expenditure for qualified fuel cell property (as defined in section 48(a)(4)) installed on or in connection with such a dwelling unit.

`(5) 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 such a dwelling unit.

`(6) QUALIFIED TIER 2 ENERGY EFFICIENT BUILDING PROPERTY EXPENDITURE-

`(A) IN GENERAL- The term `qualified Tier 2 energy efficient building property expenditure' means an expenditure for any Tier 2 energy efficient building property.

`(B) TIER 2 ENERGY EFFICIENT BUILDING PROPERTY- The term `Tier 2 energy efficient building property' means--

`(i) an electric heat pump water heater which yields an energy factor of at least 1.7 in the standard Department of Energy test procedure,

`(ii) 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 12.5,

`(iii) an advanced natural gas furnace which achieves at least 95 percent annual fuel utilization efficiency (AFUE),

`(iv) 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 12.5,

`(v) a natural gas water heater which has an energy factor of at least 0.80 in the standard Department of Energy test procedure, and

`(vi) a geothermal heat pump which has an energy efficiency ratio (EER) of at least 21.

`(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), (4), (5), or (6) and for piping or wiring to interconnect such property to the dwelling unit shall be taken into account for purposes of this section.

`(8) SWIMMING POOLS, ETC., USED AS 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.

`(e) 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 the individual owns, such individual shall be treated as having made the individual's proportionate share of any expenditures of such association.

`(B) CONDOMINIUM MANAGEMENT ASSOCIATION- For purposes of this paragraph, the term `condominium management association' means an organization which meets the requirements of paragraph (1) of section 528(c) (other than subparagraph (E) thereof) with respect to a condominium project substantially all of the units of which are used as residences.

`(4) ALLOCATION IN CERTAIN CASES- Except in the case of qualified wind energy property expenditures, if less than 80 percent of the use of an item is for nonbusiness purposes, only that portion of the expenditures for such item which is properly allocable to use for nonbusiness purposes shall be taken into account.

`(5) WHEN EXPENDITURE MADE; AMOUNT OF EXPENDITURE-

`(A) IN GENERAL- Except as provided in subparagraph (B), an expenditure with respect to an item shall be treated as made when the original installation of the item is completed.

`(B) EXPENDITURES PART OF BUILDING CONSTRUCTION- In the case of an expenditure in connection with the construction or reconstruction of a structure, such expenditure shall be treated as made when the original use of the constructed or reconstructed structure by the taxpayer begins.

`(C) AMOUNT- The amount of any expenditure shall be the cost thereof.

`(6) PROPERTY FINANCED BY SUBSIDIZED ENERGY FINANCING- For purposes of determining the amount of expenditures made by any individual with respect to any dwelling unit, there shall not be taken in to account expenditures which are made from subsidized energy financing (as defined in section 48(a)(5)(C)).

`(f) 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.

`(g) TERMINATION- The credit allowed under this section shall not apply to expenditures after December 31, 2007.'.

(b) CREDIT ALLOWED AGAINST REGULAR TAX AND ALTERNATIVE MINIMUM TAX-

(1) IN GENERAL- Section 25C(b), as added by subsection (a), is amended by adding at the end the following new paragraph:

`(3) LIMITATION BASED ON AMOUNT OF TAX- The credit allowed under subsection (a) for the taxable year shall not exceed the excess of--

`(A) the sum of the regular tax liability (as defined in section 26(b)) plus the tax imposed by section 55, over

`(B) the sum of the credits allowable under this subpart (other than this section and section 25D) and section 27 for the taxable year.'.

(2) CONFORMING AMENDMENTS-

(A) Section 25C(c), as added by subsection (a), is amended by striking `section 26(a) for such taxable year reduced by the sum of the credits allowable under this subpart (other than this section and section 25D)' and inserting `subsection (b)(3)'.

(B) Section 23(b)(4)(B) is amended by inserting `and section 25C' after `this section'.

(C) Section 24(b)(3)(B) is amended by striking `23 and 25B' and inserting `23, 25B, and 25C'.

(D) Section 25(e)(1)(C) is amended by inserting `25C,' after `25B,'.

(E) Section 25B(g)(2) is amended by striking `section 23' and inserting `sections 23 and 25C'.

(F) Section 26(a)(1) is amended by striking `and 25B' and inserting `25B, and 25C'.

(G) Section 904(h) is amended by striking `and 25B' and inserting `25B, and 25C'.

(H) Section 1400C(d) is amended by striking `and 25B' and inserting `25B, and 25C'.

(c) ADDITIONAL CONFORMING AMENDMENTS-

(1) Section 23(c), as in effect for taxable years beginning before January 1, 2004, is amended by striking `section 1400C' and inserting `sections 25C and 1400C'.

(2) Section 25(e)(1)(C), as in effect for taxable years beginning before January 1, 2004, is amended by inserting `, 25Cs,' after `sections 23'.

(3) Subsection (a) of section 1016, as amended by this Act, is amended by striking `and' at the end of paragraph (29), by striking the period at the end of paragraph (30) and inserting `, and', and by adding at the end the following new paragraph:

`(31) to the extent provided in section 25C(f), in the case of amounts with respect to which a credit has been allowed under section 25C.'.

(4) Section 1400C(d), as in effect for taxable years beginning before January 1, 2004, is amended by inserting `and section 25C' after `this section'.

(5) 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 new item:

`Sec. 25C. Residential energy efficient property.'.

(d) EFFECTIVE DATES-
(1) IN GENERAL- Except as provided by paragraph (2), the amendments made by this section shall apply to expenditures after December 31, 2002, in taxable years ending after such date.

(2) SUBSECTION (b)- The amendments made by subsection (b) shall apply to taxable years beginning after December 31, 2003.

SEC. 2104. CREDIT FOR BUSINESS INSTALLATION OF QUALIFIED FUEL CELLS AND STATIONARY MICROTURBINE POWER PLANTS.

(a) IN GENERAL- Subparagraph (A) of section 48(a)(3) (defining energy property) is amended by striking `or' at the end of clause (i), by adding `or' at the end of clause (ii), and by inserting after clause (ii) the following new clause:
`(iii) qualified fuel cell property or qualified microturbine property,'.

(b) QUALIFIED FUEL CELL PROPERTY; QUALIFIED MICROTURBINE PROPERTY- Subsection (a) of section 48 is amended by redesignating paragraphs (4) and (5) as paragraphs (5) and (6), respectively, and by inserting after paragraph (3) the following new paragraph:

`(4) QUALIFIED FUEL CELL PROPERTY; QUALIFIED MICROTURBINE PROPERTY- For purposes of this subsection--
`(A) QUALIFIED FUEL CELL PROPERTY-
`(i) IN GENERAL- The term `qualified fuel cell property' means a fuel cell power plant that--
`(I) generates at least 0.5 kilowatt of electricity using an electrochemical process, and

`(II) has an electricity-only generation efficiency greater than 30 percent.

`(ii) LIMITATION- In the case of qualified fuel cell property placed in service during the taxable year, the credit determined under paragraph (1) for such year with respect to such property shall not exceed an amount equal to the lesser of--

`(I) 30 percent of the basis of such property, or

`(II) $500 for each 0.5 kilowatt of capacity of such property.

`(iii) FUEL CELL POWER PLANT- The term `fuel cell power plant' means an integrated system comprised of a fuel cell stack assembly and associated balance of plant components that converts a fuel into electricity using electrochemical means.

`(iv) TERMINATION- Such term shall not include any property placed in service after December 31, 2007.

`(B) QUALIFIED MICROTURBINE PROPERTY-

`(i) IN GENERAL- The term `qualified microturbine property' means a stationary microturbine power plant which has an electricity-only generation efficiency not less than 26 percent at International Standard Organization conditions.

`(ii) LIMITATION- In the case of qualified microturbine property placed in service during the taxable year, the credit determined under paragraph (1) for such year with respect to such property shall not exceed an amount equal to the lesser of--

`(I) 10 percent of the basis of such property, or

`(II) $200 for each kilowatt of capacity of such property.

`(iii) STATIONARY MICROTURBINE POWER PLANT- The term `stationary microturbine power plant means a system comprising of a rotary engine which is actuated by the aerodynamic reaction or impulse or both on radial or axial curved full-circumferential-admission airfoils on a central axial rotating spindle. Such system--

`(I) commonly includes an air compressor, combustor, gas pathways which lead compressed air to the combustor and which lead hot combusted gases from the combustor to 1 or more rotating turbine spools, which in turn drive the compressor and power output shaft,

`(II) includes a fuel compressor, recuperator/regenerator, generator or alternator, integrated combined cycle equipment, cooling-heating-and-power equipment, sound attenuation apparatus, and power conditioning equipment, and

`(III) includes all secondary components located between the existing infrastructure for fuel delivery and the existing infrastructure for power distribution, including equipment and controls for meeting relevant power standards, such as voltage, frequency, and power factors.

`(iv) TERMINATION- Such term shall not include any property placed in service after December 31, 2006.'.

(c) LIMITATION- Section 48(a)(2)(A) (relating to energy percentage) is amended to read as follows:

`(A) IN GENERAL- The energy percentage is--
`(i) in the case of qualified fuel cell property, 30 percent, and

`(ii) in the case of any other energy property, 10 percent.'.

(d) CONFORMING AMENDMENTS-

(A) Section 29(b)(3)(A)(i)(III) is amended by striking `section 48(a)(4)(C)' and inserting `section 48(a