Title I — Commercial Building Modernization

“(4) Allocation of deduction

“(A) In general—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 or multifamily building, including a government, tribal, or non-profit owner, to allocate any deduction allowed under this section, or a portion thereof, to the person primarily responsible for designing the property in lieu of the owner or to a commercial tenant that leases or otherwise occupies space in such building pursuant to a written agreement. Such person shall be treated as the taxpayer for purposes of this section.

“(B) Form of allocation—An allocation made under this paragraph shall be in writing and in a form that meets the form of allocation requirements in Notice 2008–40 of the Internal Revenue Service.

“(C) Provision of allocation—Not later than 30 days after receipt of a written request from a person eligible to receive an allocation under this paragraph, the owner of a building that makes an allocation under this paragraph shall provide the form of allocation (as described in subparagraph (B)) to such person.

“(D) Allocation from public owner of building—In the case of a commercial building or multifamily building that is owned by a Federal, State, or local government or a subdivision thereof, Notice 2006–52 of the Internal Revenue Service, as amplified by Notice 2008–40, shall apply to any allocation.”

“(f) Rules for lighting systems

“(1) In general—With respect to property that is part of a lighting system, the deduction allowed under subsection (a) shall be equal to—

“(A) for a lighting system that includes installation of a lighting control described in paragraph (2)(A), the applicable amount determined under paragraph (3)(A),

“(B) for a lighting system that includes installation of a lighting control described in paragraph (2)(B), the applicable amount determined under paragraph (3)(B), or

“(C) for a lighting system that does not include installation of any lighting controls described in subparagraph (A) or (B) of paragraph (2), the applicable amount determined under paragraph (3)(C).

“(2) Energy saving controls

“(A) Lighting controls in certain spaces—For purposes of paragraph (1)(A), the lighting controls described in this subparagraph are the following:

“(i) Occupancy sensors (as described in paragraph (4)(I)) in spaces not greater than 800 square feet.

“(ii) Bi-level controls (as described in paragraph (4)(A)).

“(iii) Continuous or step dimming controls (as described in subparagraphs (B) and (K) of paragraph (4)).

“(iv) Daylight dimming where sufficient daylight is available (as described in paragraph (4)(C)).

“(v) A multi-scene controller (as described in paragraph (4)(H)).

“(vi) Time scheduling controls (as described in paragraph (4)(L)), provided that such controls are not required by Standard 90.1-2010.

“(vii) Such other lighting controls as the Secretary, in consultation with the Secretary of Energy, determines appropriate.

“(B) Other control types—For purposes of paragraph (1)(B), the lighting controls described in this subparagraph are the following:

“(i) Occupancy sensors (as described in paragraph (4)(I)) in spaces greater than 800 square feet.

“(ii) Demand responsive controls (as described in paragraph (4)(D)).

“(iii) Lumen maintenance controls (as described in paragraph (4)(F)) where solid state lighting is used.

“(iv) Such other lighting controls as the Secretary, in consultation with the Secretary of Energy, determines appropriate.

“(3) Applicable amount

“(A) Lighting controls in certain spaces—For purposes of paragraph (1)(A), the applicable amount shall be determined in accordance with the following table:

“(B) Lighting controls in larger spaces and where solid lighting is used—For purposes of paragraph (1)(B), the applicable amount shall be determined in accordance with the following table:

“(C) No qualified lighting controls—For purposes of paragraph (1)(C), the applicable amount shall be determined in accordance with the following table:

“(4) Definitions—For purposes of this subsection:

“(A) Bi-level control

“(i) In general—Subject to clause (ii), the term bi-level control means a lighting control strategy that provides for 2 different levels of lighting.

“(ii) Full-off setting—For purposes of clause (i), a bi-level control shall also provide for a full-off setting.

“(B) Continuous dimming—The term continuous dimming means a lighting control strategy that adjusts the light output of a lighting system between minimum and maximum light output in a manner that is not perceptible.

“(C) Daylight dimming; sufficient daylight

“(i) Daylight dimming—The term daylight dimming means any device that—

“(I) adjusts electric lighting power in response to the amount of daylight that is present in an area, and

“(II) provides for separate control of the lamps for general lighting in the daylight area by not less than 1 multi-level photocontrol, including continuous dimming devices, that satisfies the following requirements:

“(aa) The light sensor for the multi-level photocontrol is remote from where calibration adjustments are made.

“(bb) The calibration adjustments are readily accessible.

“(cc) The multi-level photocontrol reduces electric lighting power in response to the amount of daylight with—

“(AA) not less than 1 control step that is between 50 percent and 70 percent of design lighting power, and

“(BB) not less than 1 control step that is not less than 35 percent of design lighting power.

“(ii) Sufficient daylight

“(I) In general—The term sufficient daylight means—

“(aa) in the case of toplighted areas, when the total daylight area under skylights plus the total daylight area under rooftop monitors in an enclosed space is greater than 900 square feet (as defined in Standard 90.1-2010), and

“(bb) in the case of sidelighted areas, when the combined primary sidelight area in an enclosed space is not less than 250 square feet (as defined in Standard 90.1-2010).

“(II) Exceptions—Sufficient daylight shall be deemed to not be available if—

“(aa) in the case of areas described in subclause (I)(aa)—

“(AA) for daylighted areas under skylights, it is documented that existing adjacent structures or natural objects block direct beam sunlight for more than 1500 daytime hours (after 8 a.m. and before 4 p.m., local time) per year,

“(BB) for daylighted areas, the skylight effective aperture is less than 0.006, or

“(CC) for buildings in climate zone 8, as defined under Standard 90.1-2010, the daylight areas total less than 1500 square feet in an enclosed space, and

“(bb) in the case of primary sidelighted areas described in subclause (I)(bb)—

“(AA) the top of the existing adjacent structures are at least twice as high above the windows as the distance from the window, or

“(BB) the sidelighting effective aperture is less than 0.1.

“(iii) Daylight, sidelighting, and other related terms—The terms daylight area, daylight area under skylights, daylight area under rooftop monitors, daylighted area, enclosed space, primary sidelighted areas, sidelighting effective aperture, and skylight effective aperture have the same meaning given such terms under Standard 90.1-2010.

“(D) Demand Responsive Control

“(i) In general—The term demand responsive control means a control device that receives and automatically responds to a demand response signal and—

“(I) in the case of space-conditioning systems, conducts a centralized demand shed for non-critical zones during a demand response period and that has the capability to, on a signal from a centralized contract or software point within an Energy Management Control System—

“(aa) remotely increase the operating cooling temperature set points in such zones by not less than 4 degrees,

“(bb) remotely decrease the operating heating temperature set points in such zones by not less than 4 degrees,

“(cc) remotely reset temperatures in such zones to originating operating levels, and

“(dd) provide an adjustable rate of change for any temperature adjustment and reset, and

“(II) in the case of lighting power, has the capability to reduce lighting power by not less than 30 percent during a demand response period.

“(ii) Demand response period—The term demand response period means a period in which short-term adjustments in electricity usage are made by end-use customers from normal electricity consumption patterns, including adjustments in response to—

“(I) the price of electricity, and

“(II) participation in programs or services that are designed to modify electricity usage in response to wholesale market prices for electricity or when reliability of the electrical system is in jeopardy.

“(iii) Demand response signal—The term demand response signal means a signal sent to an end-use customer by a local utility, independent system operator, or designated curtailment service provider or aggregator that—

“(I) indicates an adjustment in the price of electricity, or

“(II) is a request to modify electricity consumption.

“(E) Lamp—The term lamp means an artificial light source that produces optical radiation (including ultraviolet and infrared radiation).

“(F) Lumen maintenance control—The term lumen maintenance control means a lighting control strategy that maintains constant light output by adjusting lamp power to compensate for age and cleanliness of luminaires.

“(G) Luminaire—The term luminaire means a complete lighting unit for the production, control, and distribution of light that consists of—

“(i) not less than 1 lamp, and

“(ii) any of the following items:

“(I) Optical control devices designed to distribute light.

“(II) Sockets or mountings for the positioning, protection, and operation of the lamps.

“(III) Mechanical components for support or attachment.

“(IV) Electrical and electronic components for operation and control of the lamps.

“(H) Multi-scene control—The term multi-scene control means a lighting control device or system that allows for—

“(i) not less than 2 predetermined lighting settings,

“(ii) a setting that turns off all luminaires in an area, and

“(iii) a recall of the settings described in clauses (i) and (ii) for any luminaires or groups of luminaires to adjust to multiple activities within the area.

“(I) Occupancy sensor—The term occupancy sensor means a control device that—

“(i) detects the presence or absence of individuals within an area and regulates lighting, equipment, or appliances according to a required sequence of operation,

“(ii) shuts off lighting when an area is unoccupied,

“(iii) except in areas designated as emergency egress and using less than 0.2 watts per square foot of floor area, provides for manual shut-off of all luminaires regardless of the status of the sensor and allows for—

“(I) independent control in each area enclosed by ceiling-height partitions,

“(II) controls that are readily accessible, and

“(III) operation by a manual switch that is located in the same area as the lighting that is subject to the control device.

“(J) Standard 90.1-2010—The term Standard 90.1-2010 means Standard 90.1-2010 of the American Society of Heating, Refrigerating, and Air Conditioning Engineers and the Illuminating Engineering Society of North America.

“(K) Step dimming—The term step dimming means a lighting control strategy that adjusts the light output of a lighting system by 1 or more predetermined amounts of greater than 1 percent of full output in a manner that may be perceptible.

“(L) Time scheduling control—The term time scheduling control means a control strategy that automatically controls lighting, equipment, or systems based on a particular time of day or other daily event (including sunrise and sunset).”

“(i) Reporting program—For purposes of the report required under section 179F(l), the Secretary, in consultation with the Secretary of Energy, shall—

“(1) develop a program to collect a statistically valid sample of energy consumption data from taxpayers that received full deductions under this section, regardless of whether such taxpayers allocated all or a portion of such deduction, and

“(2) include such data in the report, with such redactions as deemed necessary to protect the personally identifiable information of such taxpayers.”

“(j) Special rule for partnerships and S corporations—In the case of a partnership or S corporation, this section shall be applied at the partner or shareholder level, subject to such reporting requirements as are determined appropriate by the Secretary.”

“179F. Deduction for retrofits of existing commercial and multifamily buildings

“(a) Allowance of deduction

“(1) In general—With respect to each certified retrofit plan, there shall be allowed as a deduction an amount equal to the lesser of—

“(A) the sum of—

“(i) the design deduction, and

“(ii) the realized deduction, or

“(B) the total cost to develop and implement such certified retrofit plan.

“(2) Exception—For purposes of the amount described in paragraph (1)(B), if such amount is taken as a design deduction, no realized deduction shall be allowed.

“(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).

“(C) No recapture of design deduction—Notwithstanding the regulations prescribed under subsection (f), no recapture of a design deduction shall be required where the owner of the commercial or multifamily building—

“(i) claims or allocates a design deduction when energy-efficient measures are placed into service pursuant to the terms and conditions of a certified retrofit plan, and

“(ii) is not eligible for or does not subsequently claim or allocate a realized deduction.

“(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

“(i) In general—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—

“(I) each be increased by 20 percent, for the purposes of calculating any applicable design deduction and realized deduction, and

“(II) not exceed the total cost to develop and implement such certified retrofit plan.

“(ii) Exception—If the amount described in clause (i)(II) is taken as a design deduction, then no realized deduction shall be allowed.

“(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 licensed engineer or architect 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 licensed engineer or architect 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 licensed engineer or architect 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 licensed engineer or architect, 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, as described in paragraph (2),

“(E) requires that after the energy-efficient measures are placed in service, the commercial building or multifamily building meets the applicable State and local 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).

“(2) Average level of energy usage intensity

“(A) In general—The maximum average level of energy usage intensity under paragraph (1)(D) shall not exceed 300,000 British thermal units per square foot.

“(B) Regulations

“(i) In general—The Secretary, in consultation with the Administrator of the Environmental Protection Agency, shall develop distinct standards for categories and subcategories of buildings with respect to maximum average level of energy usage intensity based on the best available information used by the ENERGY STAR program.

“(ii) Review—The standards developed pursuant to clause (i) shall be reviewed and updated by the Secretary, in consultation with the Administrator of the Environmental Protection Agency, not later than every 3 years.

“(3) Commercial building

“(A) In general—The term commercial building means a building located in the United States—

“(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.

“(4) 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, refrigeration, or hot water systems,

“(iii) building transportation systems, such as elevators and escalators,

“(iv) the building envelope, which may include an energy-efficient cool roof,

“(v) a continuous commissioning contract under the supervision of a licensed engineer or architect, or

“(vi) building operations or monitoring systems, including utility-grade meters and submeters, and

“(C) including equipment, materials, and systems within subparagraph (B) with respect to which depreciation (or amortization in lieu of depreciation) is allowed.

“(5) 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.

“(6) Multifamily building—The term multifamily building—

“(A) means—

“(i) a structure of 5 or more dwelling units located in the United States—

“(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.

“(7) 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 notice and opportunity for public 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 licensed engineer or architect to certify retrofit plans, model projected energy savings, and calculate realized energy savings, and

“(B) notwithstanding subsection (b)(2)(C), 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

“(1) In general—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 government, tribal, or non-profit owner, 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.

“(2) Form of allocation—An allocation made under this paragraph shall be in writing and in a form that meets the form of allocation requirements in Notice 2008–40 of the Internal Revenue Service.

“(3) Provision of allocation—Not later than 30 days after receipt of a written request from a person eligible to receive an allocation under this paragraph, the owner of a building that makes an allocation under this paragraph shall provide the form of allocation (as described in paragraph (2)) to such person.

“(4) Allocation from public owner of building—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, Notice 2006–52 of the Internal Revenue Service, 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 or so allocated.

“(j) Special Rule for Partnerships and S Corporations—In the case of a partnership or S corporation, this section shall be applied at the partner or shareholder level, subject to such reporting requirements as are determined appropriate by the Secretary.

“(k) 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.

“(l) Report to Congress

“(1) In general—Biennially, beginning with the first year after the enactment of this section, the Secretary, in conjunction with the Secretary of Energy, shall submit a report to Congress that—

“(A) explains the energy saved, the energy-efficient measures implemented, the realization of energy savings projected, and records the amounts and types of deductions allowed under this section,

“(B) explains the energy saved, the energy efficient measures implemented, and records the amount of deductions allowed under section 179D, based on the data collected pursuant to subsection (i) of such section,

“(C) determines the number of jobs created as a result of the deduction allowed under this section,

“(D) determines how the use of any deduction allowed under this section may be improved, based on the information provided to the Secretary of Energy,

“(E) provides aggregated data with respect to the information described in subparagraphs (A) through (D), and

“(F) provides statutory recommendations to Congress that would reduce energy consumption in new and existing commercial buildings located in the United States, including recommendations on providing energy-efficient tax incentives for subsections of buildings that operate with specific utility-grade metering.

“(2) Protection of taxpayer information—The Secretary and the Secretary of Energy shall share 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.

“(3) Incorporation into Department of Energy programs—The Secretary of Energy shall, to the maximum extent practicable, incorporate conclusions of the report under this subsection into current Department of Energy building performance and energy efficiency data collection and other reporting programs.

“(m) Termination—This section shall not apply to any property placed in service after December 31, 2016.”