To amend the Internal Revenue Code of 1986 to allow a credit for residential solar energy property.

January 7, 2003

Mr. HAYWORTH introduced the following bill; which was referred to the Committee on Ways and Means

To amend the Internal Revenue Code of 1986 to allow a credit for residential solar energy property.

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

SECTION 1. SHORT TITLE.

This Act may be cited as the `Residential Solar Energy Tax Credit Act'.

SEC. 2. CREDIT FOR RESIDENTIAL SOLAR ENERGY PROPERTY.

(a) IN GENERAL- Subpart A of part IV of subchapter A of chapter 1 of the Internal Revenue Code of 1986 (relating to nonrefundable personal credits) is amended by inserting after section 25B the following new section:

`SEC. 25C. RESIDENTIAL SOLAR ENERGY 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, and

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

`(b) LIMITATIONS-

`(1) MAXIMUM CREDIT- The credit allowed under subsection (a) shall not exceed--

`(A) $2,000 for each system of property described in subsection (c)(1), and

`(B) $2,000 for each system of property described in subsection (c)(2).

`(2) TYPE OF PROPERTY- No expenditure may be taken into account under this section unless such expenditure is made by the taxpayer for property installed on or in connection with a dwelling unit which is located in the United States and which is used as a residence.

`(3) SAFETY CERTIFICATIONS- No credit shall be allowed under this section for an item of property unless--

`(A) in the case of solar water heating equipment, such equipment 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, and

`(B) in the case of a photovoltaic system, such system meets appropriate fire and electric code requirements.

`(c) 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 that uses solar energy to heat water for use in a dwelling unit with respect to which a majority of the energy is derived from the sun.

`(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 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) LABOR COSTS- Expenditures for labor costs properly allocable to the onsite preparation, assembly, or original installation of the property described in paragraph (1) or (2) and for piping or wiring to interconnect such property to the dwelling unit shall be taken into account for purposes of this section.

`(5) 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.

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

`(1) DOLLAR AMOUNTS IN CASE OF JOINT OCCUPANCY- In the case of any dwelling unit which is jointly occupied and used during any calendar year as a residence by 2 or more individuals the following shall apply:

`(A) The amount of the credit allowable under subsection (a) by reason of expenditures (as the case may be) made during such calendar year by any of such individuals with respect to such dwelling unit shall be determined by treating all of such individuals as 1 taxpayer whose taxable year is such calendar year.

`(B) There shall be allowable with respect to such expenditures to each of such individuals, a credit under subsection (a) for the taxable year in which such calendar year ends in an amount which bears the same ratio to the amount determined under subparagraph (A) as the amount of such expenditures made by such individual during such calendar year bears to

the aggregate of such expenditures made by all of such individuals during such calendar year.

`(2) TENANT-STOCKHOLDER IN COOPERATIVE HOUSING CORPORATION- In the case of an individual who is a tenant-stockholder (as defined in section 216) in a cooperative housing corporation (as defined in such section), such individual shall be treated as having made his tenant-stockholder's proportionate share (as defined in section 216(b)(3)) of any expenditures of such corporation.

`(3) CONDOMINIUMS-

`(A) IN GENERAL- In the case of an individual who is a member of a condominium management association with respect to a condominium which he owns, such individual shall be treated as having made his proportionate share of any expenditures of such association.

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

`(4) JOINT OWNERSHIP OF ITEMS OF SOLAR ENERGY PROPERTY-

`(A) IN GENERAL- Any expenditure otherwise qualifying as an expenditure described in paragraph (1) or (2) of subsection (c) shall not be treated as failing to so qualify merely because such expenditure was made with respect to 2 or more dwelling units.

`(B) LIMITS APPLIED SEPARATELY- In the case of any expenditure described in subparagraph (A), the amount of the credit allowable under subsection (a) shall (subject to paragraph (1)) be computed separately with respect to the amount of the expenditure made for each dwelling unit.

`(5) ALLOCATION IN CERTAIN CASES- If less than 80 percent of the use of an item is for nonbusiness residential purposes, only that portion of the expenditures for such item which is properly allocable to use for nonbusiness residential purposes shall be taken into account. For purposes of this paragraph, use for a swimming pool shall be treated as use which is not for residential purposes.

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

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

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

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

`(e) BASIS ADJUSTMENTS- For purposes of this subtitle, if a credit is allowed under this section for any expenditure with respect to any property, the increase in the basis of such property which would (but for this subsection) result from such expenditure shall be reduced by the amount of the credit so allowed.

`(f) TERMINATION- The credit allowed under this section shall not apply to taxable years beginning after December 31, 2008.'.

(b) CONFORMING AMENDMENTS-

(1) Subsection (a) of section 1016 of such Code 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 25C(e), in the case of amounts with respect to which a credit has been allowed under section 25C.'.

(2) The table of sections for subpart A of part IV of subchapter A of chapter 1 of such Code is amended by inserting after the item relating to section 25B the following new item:

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

(c) EFFECTIVE DATE- The amendments made by this section shall apply to taxable years ending after December 31, 2003.

END