[Congressional Bills 112th Congress]
[From the U.S. Government Publishing Office]
[S. 3591 Introduced in Senate (IS)]
112th CONGRESS
2d Session
S. 3591
To amend the Internal Revenue Code of 1986 to improve and extend the
deduction for new and existing energy-efficient commercial buildings,
and for other purposes.
_______________________________________________________________________
IN THE SENATE OF THE UNITED STATES
September 20, 2012
Ms. Snowe (for herself, Mr. Bingaman, Mrs. Feinstein, and Mr. Cardin)
introduced the following bill; which was read twice and referred to the
Committee on Finance
_______________________________________________________________________
A BILL
To amend the Internal Revenue Code of 1986 to improve and extend the
deduction for new and existing energy-efficient commercial buildings,
and for other purposes.
Be it enacted by the Senate and House of Representatives of the
United States of America in Congress assembled,
SECTION 1. SHORT TITLE; AMENDMENT OF 1986 CODE; TABLE OF CONTENTS.
(a) Short Title.--This Act may be cited as the ``Commercial
Building Modernization Act''.
(b) Amendment of 1986 Code.--Except as otherwise expressly
provided, whenever in this Act an amendment or repeal is expressed in
terms of an amendment to, or repeal of, a section or other provision,
the reference shall be considered to be made to a section or other
provision of the Internal Revenue Code of 1986.
SEC. 2. EXTENSION AND MODIFICATION OF DEDUCTION FOR ENERGY-EFFICIENT
COMMERCIAL BUILDINGS.
(a) Extension.--
(1) Through 2016.--Subsection (h) of section 179D is
amended by striking ``December 31, 2013'' and inserting
``December 31, 2016''.
(2) Inclusion of multifamily buildings.--
(A) In general.--Subparagraph (B) of section
179D(c)(1) is amended by striking ``building'' and
inserting ``commercial building or multifamily
building''.
(B) Definitions.--Subsection (c) of section 179D is
amended by adding at the end the following new
paragraphs:
``(3) Commercial building.--The term `commercial building'
means a building with a primary use or purpose other than as
residential housing.
``(4) Multifamily building.--The term `multifamily
building' means a structure of 5 or more dwelling units with a
primary use as residential housing, and includes such buildings
owned and operated as a condominium, cooperative, or other
common interest community.''.
(3) Inclusion of property located in possessions or
territories.--Clause (i) of section 179D(c)(1)(B) is amended by
inserting ``or any possession or territory thereof'' after
``United States''.
(b) Increase in Maximum Amount of Deduction.--
(1) In general.--Subparagraph (A) of section 179D(b)(1) is
amended by striking ``$1.80'' and inserting ``$3.00''.
(2) Partial allowance.--Paragraph (1) of section 179D(d) is
amended to read as follows:
``(1) Partial allowance.--
``(A) In general.--Except as provided in subsection
(f), if--
``(i) the requirement of subsection
(c)(1)(D) is not met, but
``(ii) there is a certification in
accordance with paragraph (6) that--
``(I) any system referred to in
subsection (c)(1)(C) satisfies the
energy-savings targets established by
the Secretary under subparagraph (B)
with respect to such system, or
``(II) the systems referred to in
subsection (c)(1)(C)(ii) and subsection
(c)(1)(C)(iii) together satisfy the
energy-savings targets established by
the Secretary under subparagraph (B)
with respect to such systems,
then the requirement of subsection (c)(1)(D) shall be
treated as met with respect to such system or systems,
and the deduction under subsection (a) shall be allowed
with respect to energy-efficient commercial building
property installed as part of such system and as part
of a plan to meet such targets, except that subsection
(b) shall be applied to such property described in
clause (ii)(I) by substituting `$1.00' for `$3.00' and
to such property described in clause (ii)(II) by
substituting `$2.20' for `$3.00'.
``(B) Regulations.--
``(i) In general.--The Secretary, after
consultation with the Secretary of Energy,
shall promulgate regulations establishing a
target for each system described in subsection
(c)(1)(C) which, if such targets were met for
all such systems, the property would meet the
requirements of subsection (c)(1)(D).
``(ii) Safe harbor for combined systems.--
The Secretary, after consultation with the
Secretary of Energy, and not later than 6
months after the date of the enactment of the
Commercial Building Modernization Act, shall
promulgate regulations regarding combined
envelope and mechanical system performance that
detail appropriate components, efficiency
levels, or other relevant information for the
systems referred to in subsection
(c)(1)(C)(iii) and subsection (c)(1)(C)(iv)
together to be deemed to have achieved two-
thirds of the requirements of subsection
(c)(1)(D).''.
(c) Denial of Double Benefit Rules.--
(1) In general.--Section 179D is amended by redesignating
subsections (g) and (h) as subsections (h) and (i),
respectively, and by inserting after subsection (f) the
following new subsection:
``(g) Tax Incentives Not Available.--Energy-efficient measures for
which a deduction is allowed under this section shall not be eligible
for a deduction under section 179F.''.
(2) Low-income housing exception to basis reduction.--
Subsection (e) of section 179D is amended by inserting ``(other
than property placed in service in a qualified low-income
building (within the meaning of section 42))'' after ``building
property''.
(d) Allocation of Deduction.--Section 179D, as amended by
subsection (c)(1), is amended by redesignating subsection (i) as
subsection (j) and by inserting after subsection (h) the following new
subsection:
``(i) Allocation of Deduction.--Not later than 180 days after the
date of the enactment of this subsection, the Secretary, in
consultation with the Secretary of Energy, shall promulgate a
regulation to allow the owner of a commercial building, including a
non-profit, to allocate any deduction allowed under this section, or a
portion thereof, to the person primarily responsible for funding,
financing, designing, leasing, operating, or placing in service energy-
efficient measures. Such person shall be treated as the taxpayer for
purposes of this section and shall include a building tenant,
financier, architect, professional engineer, licensed contractor,
energy services company, or other building professional. In the case of
a commercial building that is owned by a Federal, State, or local
government or a subdivision thereof, Internal Revenue Notice 2006-52,
as amplified by Notice 2008-40, shall apply to any allocation.''.
(e) Earnings and Profits Conformity for Real Estate Investment
Trusts.--Subparagraph (B) of section 312(k)(3) is amended--
(1) by striking ``.--For purposes of'' and inserting ``.--
``(i) In general.--Except as provided in
clause (ii), for purposes of'', and
(2) by adding at the end the following new clause:
``(ii) Earnings and profits conformity for
real estate investment trusts.--
``(I) In general.--For purposes of
computing the earnings and profits of a
real estate investment trust (other
than a captive real estate investment
trust), the entire amount deductible
under section 179D shall be allowed as
deductions in the taxable years for
which such amounts are claimed under
such section.
``(II) Captive real estate
investment trust.--The term `captive
real estate investment trust' means a
real estate investment trust the shares
or beneficial interests of which are
not regularly traded on an established
securities market and more than 50
percent of the voting power or value of
the beneficial interests or shares of
which are owned or controlled, directly
or indirectly, or constructively, by a
single entity that is treated as an
association taxable as a corporation
under this title and is not exempt from
taxation pursuant to the provisions of
section 501(a).
``(III) Rules of application.--For
purposes of this clause, the
constructive ownership rules of section
318(a), as modified by section
856(d)(5), shall apply in determining
the ownership of stock, assets, or net
profits of any person, and the
following entities are not considered
an association taxable as a
corporation:
``(aa) Any real estate
investment trust other than a
captive real estate investment
trust.
``(bb) Any qualified real
estate investment trust
subsidiary under section 856,
other than a qualified REIT
subsidiary of a captive real
estate investment trust.
``(cc) Any Listed
Australian Property Trust
(meaning an Australian unit
trust registered as a `Managed
Investment Scheme' under the
Australian Corporations Act in
which the principal class of
units is listed on a recognized
stock exchange in Australia and
is regularly traded on an
established securities market),
or an entity organized as a
trust, provided that a Listed
Australian Property Trust owns
or controls, directly or
indirectly, 75 percent or more
of the voting power or value of
the beneficial interests or
shares of such trust.
``(dd) Any corporation,
trust, association, or
partnership organized outside
the laws of the United States
and which satisfies the
criteria described in subclause
(IV).
``(IV) Criteria.--The criteria
described in this subclause are as
follows:
``(aa) At least 75 percent
of the entity's total asset
value at the close of its
taxable year is represented by
real estate assets (as defined
in section 856(c)(5)(B)), cash
and cash equivalents, and
United States Government
securities.
``(bb) The entity is not
subject to tax on amounts
distributed to its beneficial
owners, or is exempt from
entity-level taxation.
``(cc) The entity
distributes at least 85 percent
of its taxable income (as
computed in the jurisdiction in
which it is organized) to the
holders of its shares or
certificates of beneficial
interest on an annual basis.
``(dd) Not more than 10
percent of the voting power or
value in such entity is held
directly or indirectly or
constructively by a single
entity or individual, or the
shares or beneficial interests
of such entity are regularly
traded on an established
securities market.
``(ee) The entity is
organized in a country which
has a tax treaty with the
United States.''.
(f) Updated Standards.--
(1) Initial update.--
(A) In general.--Section 179D is amended by
striking ``90.1-2001'' each place it appears in
subsections (c) and (f) and inserting ``90.1-2004''.
(B) Conforming amendment.--Paragraph (2) of section
179D(c) is amended by striking ``(as in effect on April
2, 2003)''.
(2) Second update.--
(A) In general.--Section 179D is amended by
striking ``90.1-2004'' each place it appears in
subsections (c) and (f) and inserting ``90.1-2007''.
(B) Effective date.--The amendments made by
subparagraph (A) shall apply to property placed in
service after December 31, 2014.
(g) Treatment of Lighting Systems.--Section 179D is amended by
striking ``interior'' each place it appears in subsections (c)(1) and
(f)(1).
(h) Voluntary Reporting Program.--Section 179D, as amended by
subsection (d), is amended by redesignating subsection (j) as
subsection (k) and by inserting after subsection (i) the following new
subsection:
``(i) Voluntary Reporting Program.--For purposes of the report
required under section 179F(k), the Secretary, in consultation with the
Secretary of Energy, shall develop a voluntary program to provide
energy consumption data from recipients and current tenants of
buildings that received full deductions under this section.''.
(i) Effective Date.--Except as otherwise provided, the amendments
made by this section shall apply to property placed in service in
taxable years beginning after the date of the enactment of this Act.
SEC. 3. DEDUCTION FOR RETROFITS OF EXISTING COMMERCIAL AND MULTIFAMILY
BUILDINGS.
(a) In General.--Part VI of subchapter B of chapter 1 of the
Internal Revenue Code of 1986 is amended by inserting after section
179E the following new section:
``SEC. 179F. DEDUCTION FOR RETROFITS OF EXISTING COMMERCIAL AND
MULTIFAMILY BUILDINGS.
``(a) Allowance of Deduction.--With respect to each certified
retrofit plan, there shall be allowed as a deduction an amount equal to
the lesser of--
``(1) the sum of--
``(A) the design deduction, and
``(B) the realized deduction, or
``(2) 50 percent of the total cost to develop and implement
such certified retrofit plan.
``(b) Deduction Amounts.--For purposes of this section--
``(1) Design deduction.--A design deduction shall be--
``(A) based on projected source energy savings as
calculated in accordance with subsection (c)(3)(B),
``(B) correlated to the percent of source energy
savings set forth in the general scale in paragraph
(3)(A) that a certified retrofit plan is projected to
achieve when energy-efficient measures are placed in
service, and
``(C) equal to 60 percent of the amount allowed
under the general scale.
``(2) Realized deduction.--
``(A) In general.--A realized deduction shall be--
``(i) based on realized source energy
savings as calculated in accordance with
subsection (c)(3)(C),
``(ii) correlated to the percent of source
energy savings set forth in the general scale
in paragraph (3)(A) as realized by a certified
retrofit plan, and
``(iii) equal to 40 percent of the amount
allowed under the general scale.
``(B) Adjustment of source energy savings.--The
percent of source energy savings for purposes of any
realized deduction may vary from such savings projected
when energy-efficient measures were placed in service
for purposes of a design deduction under paragraph (1).
``(3) General scale.--
``(A) In general.--The scale for deductions allowed
under this section shall be--
``(i) $1.00 per square foot of retrofit
floor area for 20 to 24 percent source energy
savings,
``(ii) $1.50 per square foot of retrofit
floor area for 25 to 29 percent source energy
savings,
``(iii) $2.00 per square foot of retrofit
floor area for 30 to 34 percent source energy
savings,
``(iv) $2.50 per square foot of retrofit
floor area for 35 to 39 percent source energy
savings,
``(v) $3.00 per square foot of retrofit
floor area for 40 to 44 percent source energy
savings,
``(vi) $3.50 per square foot of retrofit
floor area for 45 to 49 percent source energy
savings, and
``(vii) $4.00 per square foot of retrofit
floor area for 50 percent or more source energy
savings.
``(B) Historic buildings.--With respect to energy-
efficient measures placed in service as part of a
certified retrofit plan in a commercial building or
multifamily building on or eligible for the National
Register of Historic Places, the respective dollar
amounts set forth in the general scale under
subparagraph (A) shall each be increased by 20 percent,
for the purposes of calculating any applicable design
deduction and realized deduction.
``(c) Calculation of Energy Savings.--
``(1) In general.--For purposes of the design deduction and
the realized deduction, source energy savings shall be
calculated with reference to a baseline of the annual source
energy consumption of the commercial or multifamily building
before energy-efficient measures were placed in service.
``(2) Baseline benchmark.--The baseline under paragraph (1)
shall be determined using a building energy performance
benchmarking tool designated by the Administrator of the
Environmental Protection Agency, and based upon 1 year of
source energy consumption data prior to the date upon which the
energy-efficient measures are placed in service.
``(3) Design and realized source energy savings.--
``(A) In general.--In certifying a retrofit plan as
a certified retrofit plan, a professional engineer
shall calculate source energy savings by utilizing the
baseline benchmark defined in paragraph (2) and
determining percent improvements from such baseline.
``(B) Design deduction.--For purposes of claiming a
design deduction, the regulations issued under
subsection (f)(1) shall prescribe the standards and
process for a professional engineer to calculate and
certify source energy savings projected from the design
of a certified retrofit plan as of the date energy-
efficient measures are placed in service.
``(C) Realized deduction.--For purposes of claiming
a realized deduction, a professional engineer shall
calculate and certify source energy savings realized by
a certified retrofit plan 2 years after a design
deduction is allowed by utilizing energy consumption
data after energy-efficient measures are placed in
service, and adjusting for climate, building occupancy
hours, density, or other factors deemed appropriate in
the benchmarking tool designated under paragraph (2).
``(d) Certified Retrofit Plan and Other Definitions.--For purposes
of this section--
``(1) Certified retrofit plan.--The term `certified
retrofit plan' means a plan that--
``(A) is designed to reduce the annual source
energy costs of a commercial building, or a multifamily
building, through the installation of energy-efficient
measures,
``(B) is certified under penalty of perjury by a
registered professional engineer, who is not a direct
employee of the owner of the commercial building or
multifamily building that is the subject of the plan,
and is licensed in the State in which such building is
located,
``(C) describes the square footage of retrofit
floor area covered by such a plan,
``(D) specifies that it is designed to achieve a
final source energy usage intensity after energy-
efficient measures are placed in service in a
commercial building or a multifamily building that does
not exceed on a square foot basis the average level of
energy usage intensity of other similar buildings,
``(E) requires that after the energy-efficient
measures are placed in service, the commercial building
or multifamily building meets the applicable State and
local new building code requirements for the area in
which such building is located,
``(F) satisfies the regulations prescribed under
subsection (f), and
``(G) is submitted to the Secretary of Energy after
energy-efficient measures are placed in service, for
the purpose of informing the report to Congress
required by subsection (l).
The standard under subparagraph (D) shall be 300,000 British
thermal units or less per square foot unless the Secretary, in
consultation with the Administrator of the Environmental
Protection Agency, develops distinct minimum standards for a
particular category or subcategory of building based on the
best available information used by the ENERGY STAR program.
``(2) Commercial building.--
``(A) In general.--The term `commercial building'
means a building located in the United States or any
possession or territory thereof--
``(i) that is in existence and occupied on
the date of the enactment of this section,
``(ii) for which a certificate of occupancy
has been issued at least 10 years before energy
efficiency measures are placed in service, and
``(iii) with a primary use or purpose other
than as residential housing.
``(B) Shopping centers.--In the case of a retail
shopping center, the term `commercial building' shall
include an area within such building that is--
``(i) 50,000 square feet or larger that is
covered by a separate utility grade meter to
record energy consumption in such area, and
``(ii) under the day-to-day management and
operation of--
``(I) the owner of such building as
common space areas, or
``(II) a retail tenant, lessee, or
other occupant.
``(3) Energy-efficient measures.--The term `energy-
efficient measures' means a measure, or combination of
measures, placed in service through a certified retrofit plan--
``(A) on or in a commercial building or multifamily
building,
``(B) as part of--
``(i) the lighting systems,
``(ii) the heating, cooling, ventilation,
or hot water systems,
``(iii) the building envelope, which may
include an energy-efficient cool roof,
``(iv) a continuous commissioning contract,
or
``(v) building operations or monitoring
systems, and
``(C) including equipment, materials, and systems
within subparagraph (B) with respect to which
depreciation (or amortization in lieu of depreciation)
is allowed.
``(4) Energy savings.--The term `energy savings' means
source energy usage intensity reduced on a per square foot
basis through design and implementation of a certified retrofit
plan.
``(5) Multifamily building.--The term `multifamily
building'--
``(A) means--
``(i) a structure of 5 or more dwelling
units located in the United States or any
possession or territory thereof--
``(I) that is in existence and
occupied on the date of the enactment
of this section,
``(II) for which a certificate of
occupancy has been issued at least 10
years before energy efficiency measures
are placed in service, and
``(III) with a primary use as
residential housing, and
``(B) includes such buildings owned and operated as
a condominium, cooperative, or other common interest
community.
``(6) Source energy.--The term `source energy' means the
total amount of raw fuel that is required to operate a
commercial building or multifamily building, and accounts for
losses that are incurred in the generation, storage, transport,
and delivery of fuel to such a building.
``(e) Timing of Claiming Deductions.--Deductions allowed under this
section may be claimed as follows:
``(1) Design deduction.--In the case of a design deduction,
in the taxable year that energy efficiency measures are placed
in service.
``(2) Realized deduction.--In the case of a realized
deduction, in the second taxable year following the taxable
year described in paragraph (1).
``(f) Regulations.--
``(1) In general.--Not later than 180 days after the date
of the enactment of this section, and after opportunity for
public notice and comment, the Secretary, in consultation with
the Secretary of Energy and the Administrator of the
Environmental Protection Agency, shall prescribe regulations--
``(A) for the manner and method for a registered
professional engineer to certify retrofit plans, model
projected energy savings, and calculate realized energy
savings, and
``(B) to provide, as appropriate, for a recapture
of the deductions allowed under this section if a
retrofit plan is not fully implemented, or a retrofit
plan and energy savings are not certified or verified
in accordance with regulations prescribed under this
subsection.
``(2) Reliance on established protocols, etc.--To the
maximum extent practicable and available, such regulations
shall rely upon established protocols and documents used in the
ENERGY STAR program, and industry best practices and existing
guidelines, such as the Building Energy Modeling Guidelines of
the Commercial Energy Services Network (COMNET).
``(3) Allowance of deductions pending issuance of
regulations.--Pending issuance of the regulations under
paragraph (1), the owner of a commercial building or a
multifamily building shall be allowed to claim or allocate a
deduction allowed under this section.
``(g) Notice to Owner.--Each certification of a retrofit plan and
calculation of energy savings required under this section shall include
an explanation to the owner of a commercial building or a multifamily
building regarding the energy-efficient measures placed in service and
their projected and realized annual energy costs.
``(h) Allocation of Deduction.--Not later than 180 days after the
date of the enactment of this section, the Secretary, in consultation
with the Secretary of Energy, shall promulgate a regulation to allow
the owner of a commercial building or a multifamily building, including
a non-profit, to allocate any deduction allowed under this section, or
a portion thereof, to the person primarily responsible for funding,
financing, designing, leasing, operating, or placing in service energy-
efficient measures. Such person shall be treated as the taxpayer for
purposes of this section and shall include a building tenant,
financier, architect, professional engineer, licensed contractor,
energy services company, or other building professional. In the case of
a commercial building or a multifamily building that is owned by a
Federal, State, or local government or a subdivision thereof, Internal
Revenue Notice 2006-52, as amplified by Notice 2008-40, shall apply to
any allocation.
``(i) Basis Reduction.--For purposes of this subtitle, if a
deduction is allowed under this section with respect to any energy-
efficient measures placed in service under a certified retrofit plan
other than in a qualified low-income building (within the meaning of
section 42), the basis of such measures shall be reduced by the amount
of the deduction so allowed.
``(j) Tax Incentives Not Available.--
``(1) Energy efficient commercial buildings deduction.--
Energy-efficient measures for which a deduction is allowed
under this section shall not be eligible for a deduction under
section 179D.
``(2) New energy efficient home credit.--No deduction shall
be allowed under this section with respect to any building or
dwelling unit with respect to which a credit under section 45L
was allowed.
``(k) Report to Congress.--Biennially, beginning with the first
year after the enactment of this section, the Secretary of Energy shall
submit a report to Congress explaining the energy saved, the energy-
efficient measures implemented, the realization of energy savings
projected, and the amounts and types of deductions allowed, determining
the number of jobs created as a result of the deduction allowed under
this section, and how the use of any deduction allowed under this
section may be improved, based on the information provided to the
Secretary of Energy as part of a certified retrofit plan. The Secretary
and the Secretary of Energy shall share such information on deductions
allowed under this section and related reports submitted, as requested
by each agency to fulfill its obligations under this section, with such
redactions as deemed necessary to protect the personally identifiable
financial information of a taxpayer. In addition, the report will
include recommendations on providing energy-efficient tax incentives
for subsections of buildings that operate with specific utility grade
metering. In addition, the Secretary of Energy shall, to the maximum
extent practicable, incorporate conclusions of this report into current
Department of Energy's building performance and energy efficiency
programs and include statutory recommendations to Congress that would
reduce energy consumption in new and existing commercial buildings
located in the United States. Finally, the Secretary of Energy shall,
working with stakeholder groups, provide in such report aggregated data
that is publicly available.
``(l) Termination.--This section shall not apply with respect to
property placed in service after December 31, 2016.''.
(b) Effect on Depreciation on Earnings and Profits.--Subparagraph
(B) of section 312(k)(3), as amended by this Act, is amended--
(1) by striking ``or 179E'' both places it appears in
clause (i) and inserting ``179E, or 179F'',
(2) by striking ``or 179e'' in the heading and inserting
``179e, or 179f'', and
(3) by inserting ``or 179F'' after ``section 179D'' in
clause (ii).
(c) Conforming Amendment.--The table of sections for such part is
amended by inserting after the item relating to section 179E the
following new item:
``Sec. 179F. Deduction for retrofits of existing commercial and
multifamily buildings.''.
(d) Effective Date.--Except as otherwise provided, the amendments
made by this section shall apply to property placed in service in
taxable years beginning after the date of the enactment of this Act.
<all>