Title II — Innovation in Renewable Energy, Energy Efficiency, and Storage

“(ix) equipment which generates wind energy from an offshore facility,

“(x) energy storage equipment,

“(xi) equipment which makes a nonhydroelectric dam capable of generating hydropower, or

“(xii) equipment which generates geothermal electricity through an enhanced geothermal system.”

“45V. Deep energy retrofits and zero-energy commercial and residential buildings

“(a) Definitions—In this section:

“(1) Btu—The term “Btu” means British Thermal Unit.

“(2) Building energy—The term “building energy” means energy consumed at the building site as measured at the site boundary, which includes heating, cooling, ventilation, domestic hot water, indoor and outdoor lighting, plug loads, process energy, elevators and conveying systems, and intrabuilding transportation systems.

“(3) Deep energy retrofit—The term “deep energy retrofit” means a project that uses energy efficiency measures and renewable energy resources to reduce the energy use of an existing building by at least 50 percent on an annual basis relative to the most recent 12-month period in which the building was fully occupied prior to the project, provided that energy efficiency measures must account for at least 80 percent of the reduction in energy use.

“(4) Delivered energy—The term “delivered energy” means any type of energy that could be bought or sold as building energy, including electricity, steam, hot or chilled water, natural gas, biogas, landfill gas, coal, coke, propane, petroleum and its derivatives, residual fuel oil, alcohol-based fuels, wood, biomass, and any other material consumed as fuel.

“(5) Exported energy—The term “exported energy” means on-site renewable energy supplied through the site boundary and used outside the site boundary.

“(6) High rise commercial building—The term “high rise commercial building” means a commercial building of four or more above grade stories.

“(7) High rise residential building—The term “high rise residential building” means a multifamily building with four or more above grade stories.

“(8) kWh—The term “kWh” means Kilowatt Hour.

“(9) Low rise residential building—The term “low rise residential building” means a single-family home or multifamily building with no more than three above grade stories.

“(10) On-site renewable energy—The term “on-site renewable energy” means any renewable energy collected and generated within the site boundary that is used for building energy, and the excess renewable energy exported outside the site boundary, provided that any renewable energy certificates associated with the on-site renewable energy must be retained or retired by the building owner or lessee to be claimed as on-site renewable energy.

“(11) Renewable energy—The term “renewable energy” means energy generated by biomass, hydro, geothermal, solar, wind, ocean thermal, wave action, or tidal action resources.

“(12) Renewable energy certificate—The term “renewable energy certificate” means a certificate or credit that represents and conveys the environmental, social, or other nonpower qualities of one megawatt hour of renewable energy, and can be sold separately from the underlying physical electricity associated with the renewable energy resource.

“(13) Site boundary—The term “site boundary” means the limits of the building site across which delivered energy and exported energy are measured.

“(14) Source energy—The term “source energy” means building energy plus the energy losses in thermal combustion in electricity generation resources; and energy losses in transmission and distribution to the building site.

“(15) Zero-energy building—The term “zero-energy building” means a building for which, on a source energy basis, the actual annual delivered energy is less than or equal to the on-site renewable exported energy, provided that energy purchased from off-site and renewable energy generated on-site and then sold off-site shall be valued at 6000 Btu/kWh.

“(16) Zero-energy-ready building—The term “zero-energy-ready building” means a building that—

“(A) if it is a commercial building or high rise residential building—

“(i) is in compliance with Standard 90.1–2019 published by the American Society of Heating, Refrigerating and Air-Conditioning Engineers;

“(ii) is in compliance with Appendix CA (Solar-Ready Zone) of the 2021 International Energy Conservation Code; and

“(iii) demonstrates that its energy consumption is at least 30 percent below the maximum permitted under American Society of Heating, Refrigerating and Air-Conditioning Engineers Standard 90.1–2019, as calculated using the methodology in Appendix G of such standard; and

“(B) if it is a low rise residential building—

“(i) has an Energy Rating Index of 40 or less as calculated using the procedures in Chapter 3 of the residential section of the 2012 International Energy Conservation Code but excluding any renewable energy resources in the calculation, provided that certification of compliance with the Energy Rating Index requirement shall be made by a registered architect or engineer by another professional authorized by the Secretary of Energy by rule;

“(ii) is in compliance with Appendix RA (Solar-Ready Zone) of the 2021 International Energy Conservation Code; and

“(iii) is certified under—

“(I) the Zero Energy Ready Homes program administered by the Department of Energy; or

“(II) the Passive House specifications of the Passive Institute US or the International Passive House Institute.

“(b) Eligibility for tax credit—To be eligible to receive a tax credit under this section, the builder or owner of a building must demonstrate that—

“(1) the building is located in the United States;

“(2) the building is at least 50 percent occupied when the tax credit is claimed;

“(3) if the building has implemented a deep energy retrofit, the project has been completed and certified as a deep energy retrofit by a registered architect or engineer, or by another professional authorized by the Secretary of Energy by rule; and

“(4) if the building is a zero-energy building, the building has been zero-energy over a span of 12 continuous months with at least 50 percent occupancy as verified—

“(A) through certification by the Living Buildings Institute Zero Energy Certification Program;

“(B) through certification by the LEED Zero Energy Certification Program Verification; or

“(C) by another professional authorized by the Secretary of Energy by rule.

“(c) Tax credit amounts

“(1) Zero-energy-ready buildings—The following tax credit amounts shall be awarded for certified zero-energy-ready buildings—

“(A) for a residential building with no more than four dwelling units, $5,000 per dwelling unit;

“(B) for a residential building with five or more dwelling units, $3,500 per dwelling unit; and

“(C) for a commercial building, $3 per square foot of floor area.

“(2) Zero-energy buildings—The following tax credit amounts shall be awarded for certified zero-energy buildings—

“(A) for a residential building with no more than four dwelling units, $5,000 per dwelling unit;

“(B) for a residential building with five or more dwelling units, $3,500 per dwelling unit; and

“(C) for a commercial building that is a zero-energy building for a period of 12 continuous months starting after the building is at least 50 percent occupied, $3 per square foot of floor area, provided that a zero-energy building may also receive the zero-energy-ready building incentive if it meets the criteria for this incentive.

“(3) Deep energy retrofits—The following tax credit amounts shall be awarded to buildings upon completion of a deep energy retrofit—

“(A) for a residential building, $10,000 per dwelling unit, up to a maximum of $1,000,000 per building; and

“(B) for a commercial building, $25 per square foot of floor area, up to a maximum of $2,000,000 per building.

“(d) Tax credit recipient

“(1) In general—The person eligible to receive a tax credit under this section shall be—

“(A) for a new residential building, the builder;

“(B) for an existing residential building that has undergone a deep energy retrofit, the builder;

“(C) for a new commercial building, the building owner; and

“(D) for an existing commercial building that has undergone a deep energy retrofit, the building owner.

“(2) Transfer of credit—A building owner who is eligible to receive a tax credit under subparagraphs (C) and (D) of paragraph (1) may transfer such tax credit to the architect, builder, or contractor.

“(e) Exclusions—A building project is not eligible for tax credits under this section if the owner or builder has used another Federal tax incentive for the same project, including incentives under sections 25C, 25D, and 179D of this title.

“(f) Sunset of tax credit authority—The tax credit authority under this section shall terminate—

“(1) for zero-energy and zero-energy-ready residential buildings, one year after the Secretary of Energy determines by rule that such buildings accounted for at least 20 percent of new residential buildings in the most recent calendar year;

“(2) for zero-energy and zero-energy-ready commercial buildings, one year after the Secretary of Energy determines by rule that such buildings accounted for at least 20 percent of new commercial building construction in the most recent calendar year;

“(3) for deep energy retrofits to residential buildings, one year after the Secretary of Energy determines by rule that at least 10 percent of units at residential buildings have undergone such retrofits; and

“(4) for deep energy retrofits to commercial buildings, one year after the Secretary of Energy determines by rule that at least 10 percent of the floor area of commercial buildings has undergone such retrofits.

“(g) Rulemaking—Not later than one year after enactment of this section, the Secretary, in coordination with the Secretary of Energy, shall promulgate rules to implement this section.

“(h) Report to Congress—Not later than two years after enactment of this section, and each calendar year thereafter, the Secretary shall report to Congress on the use of tax credits under this section broken down by the categories in subsection (c), which report shall include—

“(1) the dollar value of tax credits awarded to date and in the prior calendar year; and

“(2) the number of units at residential buildings and the number of square feet of floor area in commercial buildings for which tax credits were awarded to date and in the prior year calendar year.”

“(vi) The generation of electric power (including the leasing of tangible personal property used for such generation) exclusively utilizing any resource described in section 45(c)(1) or energy property described in section 48 (determined without regard to any termination date) or, in the case of a facility described in paragraph (3) or (7) of section 45(d) (determined without regard to any placed in service date or date by which construction of the facility is required to begin), the accepting or processing of such resource.

“(vii) The sale of electric power, capacity, resource adequacy, demand response capabilities, or ancillary services that is produced or made available from any equipment or facility (operating as a single unit or as an aggregation of units) the principal function of which is to—

“(I) use mechanical, chemical, electrochemical, hydroelectric, or thermal processes to store energy that was generated at one time for conversion to electricity at a later time, or

“(II) store thermal energy for direct use for heating or cooling at a later time in a manner that avoids the need to use electricity at that later time.

“(viii) The generation, storage, or distribution of thermal energy exclusively utilizing property described in section 48(c)(3) (determined without regard to subparagraphs (B) and (D) thereof and without regard to any placed in service date).

“(ix) The generation, storage, or distribution of thermal energy exclusively using any resource described in section 45(c)(1) or energy property described in clause (i) or (iii) of section 48(a)(3)(A).

“(x) The use of recoverable waste energy, as defined in section 371(5) of the Energy Policy and Conservation Act (42 U.S.C. 6341(5)).”

“45W. Manufacturer credit for high-efficiency heat pumps and heat pump water heaters

“(a) Credit amounts

“(1) In general—For purposes of section 38, the energy efficient heat pump credit determined under this section for any taxable year is an amount equal to the sum of the credit amounts determined under paragraph (2) for each type of qualified energy efficient heat pump produced by the taxpayer during the calendar year ending with or within the taxable year.

“(2) Calculation of credits—The credit amount determined for any type of qualified energy efficient appliance is—

“(A) the applicable amount determined under subsection (b) with respect to such type, multiplied by

“(B) the eligible production for such type under subsection (c).

“(b) Applicable amount—For purposes of subsection (a):

“(1) Consumer heat pump water heaters—The applicable amount is $600 in the case of a consumer heat pump water heater that is manufactured in calendar years 2022 through 2030 and that has a Uniform Energy Factor of 3.3 or more for electric water heaters and 1.3 or more for gas water heaters.

“(2) Commercial heat pump water heaters—The applicable amount is $600 in the case of a commercial heat pump water heater manufactured in calendar years 2022 through 2030 and that has a Coefficient of Performance of 3.0 or more for electric water heaters and 1.3 or more for gas water heaters.

“(3) Consumer unitary heat pumps—The applicable amount is $800 in the case of a consumer unitary heat pump that—

“(A) is manufactured in calendar years 2022 through 2030,

“(B) in the case of an electric heat pump meets either—

“(i) the most recent requirements of the Energy Star Most Efficient Specification promulgated by the United States Environmental Protection Agency before the date of enactment of this section, or

“(ii) the most recent Cold Climate Air-Source Heat Pump Specification promulgated by Northeast Energy Efficiency Partnerships before the date of enactment of this section, and

“(C) in the case of a gas heat pump, has an Annual Fuel Utilization Efficiency of 140 percent or more.

“(4) Commercial heat pumps—The applicable amount is $24 per thousand British Thermal Units of heating capacity measured at a 17 degree Fahrenheit ambient temperature in the case of a commercial heat pump that is manufactured in calendar years 2022 through 2030 and that has a Coefficient of Performance of 2.3 or more at a 17 degree F ambient temperature for electric heat pumps, and 1.2 or more at a 17 degree F ambient temperature for gas heat pumps.

“(5) Industrial heat pumps—The applicable amount is $36 per thousand British Thermal Units of heating capacity for heat pumps with a heating capacity of 2,400 thousand British Thermal Units or less and $18 per thousand British Thermal Units of heating capacity for heat pumps with a heating capacity above 2,400 thousand British Thermal Units in the case of an industrial heat pump that is manufactured and installed in an industrial facility in calendar years 2022 through 2030 and that has a Coefficient of Performance of 2.0 or more.

“(c) Eligible production—The eligible production in a calendar year with respect to each type of energy efficient heat pump is—

“(1) the number of heat pumps of such type that are produced by the taxpayer in the United States during such calendar year, less

“(2) the average number of heat pumps of such type that were produced by the taxpayer (or any predecessor) in the United States during the preceding 2-calendar year period.

“(d) Types of energy efficient heat pumps—For purposes of this section, the types of energy efficient heat pumps are—

“(1) consumer heat pump water heaters described in subsection (b)(1),

“(2) commercial heat pump water heaters described in subsection (b)(2),

“(3) consumer unitary heat pumps described in subsection (b)(3),

“(4) commercial heat pumps described in subsection (b)(4), and

“(5) industrial heat pumps described in subsection (b)(5).

“(e) Limitations

“(1) Aggregate credit amount allowed—The aggregate amount of credit allowed under subsection (a) with respect to a taxpayer for any taxable year shall not exceed $250,000,000, reduced by the amount of the credit allowed under subsection (a) to the taxpayer (or any predecessor) for all prior taxable years beginning after December 31, 2021.

“(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 4 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.

“(f) Adjustment of energy efficiency criteria—No later than December 31, 2022, and every two years thereafter, the Secretary, in consultation with the Secretary of Energy, shall review the efficiency levels in section (b) and revise these levels upward if necessary to include only the most efficient commercially available heat pumps of each type, while ensuring that at least three manufacturers are represented in each type across a range of product heating capacities.

“(g) Test procedures

“(1) The Department of Energy shall develop test procedures to determine Coefficient of Performance for—

“(A) gas commercial heat pump water heaters,

“(B) gas commercial heat pumps, and

“(C) industrial heat pumps.

“(2) Such test procedures shall build upon the foundation of relevant current American National Standard Institute and International Organization of Standard test procedures.

“(h) Definitions—For purposes of this section:

“(1) Qualified energy efficient heat pump—The term “qualified energy efficient heat pump” means—

“(A) any consumer heat pump water heater described in subsection (b)(1),

“(B) any commercial heat pump water heater described in subsection (b)(2),

“(C) any consumer unitary heat pump described in subsection (b)(3),

“(D) any commercial heat pump described in subsection (b)(4), and

“(E) any industrial heat pump described in subsection (b)(5).

“(2) Consumer heat pump water heater—The term “consumer heat pump water heater” means a water heater that uses a heat pump to heat water and has an electric input of 12 Kilowatt or less or a gas input of 75,000 British Thermal Units per hour or less, measured in accordance with applicable Department of Energy test procedures.

“(3) Commercial heat pump water heaters—The term “commercial heat pump water heater” means a water heater that uses a heat pump to heat water and has an electric input of more than 12 Kilowatt or a gas input of more than 75,000 British Thermal Units per hour, measured in accordance with applicable Department of Energy test procedures.

“(4) Consumer unitary heat pump—The term “consumer unitary heat pump” means a heat pump designed to provide space heating and cooling with a cooling capacity of 65,000 British Thermal Units per hour or less, measured in accordance with the applicable Department of Energy test procedures.

“(5) Commercial heat pump—The term “commercial heat pump” means a heat pump designed to provide space heating and cooling with a cooling capacity of more than 65,000 British Thermal Units per hour, measured in accordance with the applicable Department of Energy test procedures.

“(6) Industrial heat pump—The term “industrial heat pump” means a heat pump that upgrades industrial waste heat to a higher temperature such that the delivered heat is produced and supplied to the facility more efficiently than conventional heating methods, such as a steam or electric resistance boiler.

“(7) Produced—The term “produced” includes manufactured.

“(8) Uniform energy factor—The term “Uniform Energy Factor” is a metric used to measure the efficiency of consumer water heaters, with details specified in applicable Department of Energy test procedures.

“(9) Coefficient of performance—The term “Coefficient of Performance” means the ratio of heat output to energy input, with details specified in applicable Department of Energy test procedures. For gas commercial heat pump water heaters, until there is a Department of Energy test procedure, American National Standards Institute and American Society of Heating, Refrigerating and Air-Conditioning Engineers Standard 118.1 shall be used. For gas commercial heat pumps, until there is a Department of Energy test procedure, American National Standards Standard Z21.40.4 shall be used. For industrial heat pumps, until there is a Department of Energy test procedure, manufacturers may use their own tests, provided they publicly post the test conditions and assumptions they used in developing their stated Coefficient of Performance values.

“(i) Special rules—For purposes of this section:

“(1) In general—Rules similar to the rules of subsections (c), (d), and (e) of section 52 shall apply.

“(2) Controlled group

“(A) In general—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 a single producer.

“(B) Inclusion of foreign corporations—For purposes of subparagraph (A), in applying subsections (a) and (b) of section 52 to this section, section 1563 shall be applied without regard to subsection (b)(2)(C) thereof.

“(3) Verification—No amount shall be allowed as a credit under subsection (a) with respect to which the taxpayer has not submitted such information or certification as the Secretary, in consultation with the Secretary of Energy, determines necessary.

“(4) Production in United States—The requirement for production in the United States in section (c) does not take effect until January 1, 2024.”