“(a) Amount of credit.—For purposes of section 38, the clean electricity production credit for any taxable year is an amount equal to the product of—

“(1) subject to subsection (g)(7), 1.5 cents, multiplied by

“(2) the kilowatt hours of electricity—

“(A) produced by the taxpayer at a qualified facility, and

“(B) (i) sold by the taxpayer to an unrelated person during the taxable year, or

“(ii) in the case of a qualified facility which is equipped with a metering device which is owned and operated by an unrelated person, sold, consumed, or stored by the taxpayer during the taxable year.

“(b) Qualified facility.—

“(1) IN GENERAL.—

“(A) DEFINITION.—Subject to subparagraphs (B), (C), and (D), the term ‘qualified facility’ means a facility owned by the taxpayer—

“(i) which is used for the generation of electricity,

“(ii) which is originally placed in service after December 31, 2022,

“(iii) for which the greenhouse gas emissions rate (as determined under paragraph (2)) is not greater than zero, and

“(iv) in the case of any facility with a maximum net output equal to or greater than 1 megawatt, which—

“(I) subject to subparagraph (B) of paragraph (3), satisfies the requirements under subparagraph (A) of such paragraph, and

“(II) with respect to the construction of such facility, satisfies the requirements under section 501 of the Clean Energy for America Act.

“(B) 10-YEAR PRODUCTION CREDIT.—For purposes of this section, a facility shall only be treated as a qualified facility during the 10-year period beginning on the date the facility was originally placed in service.

“(C) EXPANSION OF FACILITY; INCREMENTAL PRODUCTION.—The term ‘qualified facility’ shall include either of the following in connection with a facility described in subparagraph (A) (without regard to clause (ii) of such subparagraph) that was placed in service before January 1, 2023, but only to the extent of the increased amount of electricity produced at the facility by reason of the following:

“(i) A new unit placed in service after December 31, 2022.

“(ii) Any efficiency improvements or additions of capacity placed in service after December 31, 2022.

“(D) COORDINATION WITH OTHER CREDITS.—The term ‘qualified facility’ shall not include any facility for which a credit determined under section 45, 45J, 45Q, 48, or 48D is allowed under section 38 for the taxable year or any prior taxable year.

“(2) GREENHOUSE GAS EMISSIONS RATE.—

“(A) IN GENERAL.—For purposes of this section, the term ‘greenhouse gas emissions rate’ means the amount of greenhouse gases emitted into the atmosphere by a facility in the production of electricity, expressed as grams of CO₂e per KWh.

“(B) FUEL COMBUSTION AND GASIFICATION.—In the case of a facility which produces electricity through combustion or gasification, the greenhouse gas emissions rate for such facility shall be equal to the net rate of greenhouse gases emitted into the atmosphere by such facility (taking into account lifecycle greenhouse gas emissions, as described in section 211(o)(1)(H) of the Clean Air Act (42 U.S.C. 7545(o)(1)(H))) in the production of electricity, expressed as grams of CO₂e per KWh.

“(C) ESTABLISHMENT OF EMISSIONS RATES FOR FACILITIES.—

“(i) IN GENERAL.—The Secretary and the Administrator of the Environmental Protection Agency shall establish greenhouse gas emissions rates for types or categories of facilities, which a taxpayer shall use for purposes of this section.

“(ii) PUBLISHING EMISSIONS RATES.—The Secretary shall annually publish a table that sets forth the greenhouse gas emissions rates for similar types or categories of facilities.

“(iii) PROVISIONAL EMISSIONS RATE.—

“(I) IN GENERAL.—In the case of any facility for which an emissions rate has not been established by the Secretary and the Administrator of the Environmental Protection Agency, a taxpayer which owns such facility may file a petition with the Secretary and the Administrator of the Environmental Protection Agency for determination of the emissions rate with respect to such facility.

“(II) ESTABLISHMENT OF PROVISIONAL AND FINAL EMISSIONS RATE.—In the case of a facility for which a petition described in subclause (I) has been filed, the Secretary and the Administrator of the Environmental Protection Agency shall—

“(aa) not later than 12 months after the date on which the petition was filed, provide a provisional emissions rate for such facility which a taxpayer shall use for purposes of this section, and

“(bb) not later than 24 months after the date on which the petition was filed, establish the emissions rate for such facility.

“(D) CARBON CAPTURE AND SEQUESTRATION EQUIPMENT.—For purposes of this subsection, the amount of greenhouse gases emitted into the atmosphere by a facility in the production of electricity shall not include any qualified carbon dioxide that is captured by the taxpayer and—

“(i) pursuant to any regulations established under paragraph (2) of section 45Q(f), disposed of by the taxpayer in secure geological storage, or

“(ii) utilized by the taxpayer in a manner described in paragraph (5) of such section.

“(3) WAGE REQUIREMENTS.—

“(A) IN GENERAL.—The requirements described in this subparagraph with respect to any facility are that the taxpayer shall ensure that any laborers and mechanics employed by contractors and subcontractors in—

“(i) the construction of such facility, or

“(ii) for any year during the period described in paragraph (1)(B), the alteration or repair of such facility,

shall be paid wages at rates not less than the prevailing rates for construction, alteration, or repair of a similar character in the locality as determined by the Secretary of Labor, in accordance with subchapter IV of chapter 31 of title 40, United States Code.

“(B) FAILURE TO SATISFY WAGE REQUIREMENTS.—

“(i) IN GENERAL.—In the case of any taxpayer which fails to satisfy the requirement under subparagraph (A) with respect to any facility for any year during the period described in paragraph (1)(B), the amount of the credit which would (but for this subparagraph) be allowable under this section with respect to such facility for such year shall be reduced to zero.

“(ii) CORRECTION AND PENALTY.—Clause (i) shall not apply with respect to any failure by the taxpayer to satisfy the requirement under subparagraph (A) with respect to any facility for any year if, with respect to any laborer or mechanic who was paid wages at a rate below the rate described in such subparagraph for any period during such year, such taxpayer—

“(I) makes payment to such laborer or mechanic in an amount equal to the sum of—

“(aa) an amount equal to the difference between—

“(AA) the amount of wages paid to such laborer or mechanic during such period, and

“(BB) the amount of wages required to be paid to such laborer or mechanic pursuant to such subparagraph during such period, plus

“(bb) interest on the amount determined under item (aa) at the underpayment rate established under section 6621 for the period described in such item, and

“(II) makes payment to the Secretary of a penalty in an amount equal to the product of—

“(aa) $5,000, multiplied by

“(bb) the total number of laborers and mechanics who were paid wages at a rate below the rate described in subparagraph (A) for any period during such year.

“(c) Inflation adjustment.—

“(1) IN GENERAL.—In the case of a calendar year beginning after 2021, the 1.5 cent amount in paragraph (1) of subsection (a) shall be adjusted by multiplying such amount by the inflation adjustment factor for the calendar year in which the sale or use of the electricity occurs. If any amount as increased under the preceding sentence is not a multiple of 0.1 cent, such amount shall be rounded to the nearest multiple of 0.1 cent.

“(2) ANNUAL COMPUTATION.—The Secretary shall, not later than April 1 of each calendar year, determine and publish in the Federal Register the inflation adjustment factor for such calendar year in accordance with this subsection.

“(3) INFLATION ADJUSTMENT FACTOR.—The term ‘inflation adjustment factor’ means, with respect to a calendar year, a fraction the numerator of which is the GDP implicit price deflator for the preceding calendar year and the denominator of which is the GDP implicit price deflator for the calendar year 1992. The term ‘GDP implicit price deflator’ means the most recent revision of the implicit price deflator for the gross domestic product as computed and published by the Department of Commerce before March 15 of the calendar year.

“(d) Credit phase-Out.—

“(1) IN GENERAL.—If the Secretary, the Secretary of Energy, and the Administrator of the Environmental Protection Agency determine that the annual greenhouse gas emissions from the production of electricity in the United States are equal to or less than 25 percent of the annual greenhouse gas emissions from the production of electricity in the United States for calendar year 2021, the amount of the clean electricity production credit under subsection (a) for any qualified facility the construction of which begins during a calendar year described in paragraph (2) shall be equal to the product of—

“(A) the amount of the credit determined under subsection (a) without regard to this subsection, multiplied by

“(B) the phase-out percentage under paragraph (2).

“(2) PHASE-OUT PERCENTAGE.—The phase-out percentage under this paragraph is equal to—

“(A) for a facility the construction of which begins during the first calendar year following the calendar year in which the determination described in paragraph (1) is made, 100 percent,

“(B) for a facility the construction of which begins during the second calendar year following such determination year, 75 percent,

“(C) for a facility the construction of which begins during the third calendar year following such determination year, 50 percent, and

“(D) for a facility the construction of which begins during any calendar year subsequent to the year described in subparagraph (C), 0 percent.

“(e) Definitions.—For purposes of this section:

“(1) CO₂e PER KWh.—The term ‘CO₂e per KWh’ means, with respect to any greenhouse gas, the equivalent carbon dioxide (as determined based on global warming potential) per kilowatt hour of electricity produced.

“(2) GREENHOUSE GAS.—The term ‘greenhouse gas’ has the same meaning given such term under section 211(o)(1)(G) of the Clean Air Act (42 U.S.C. 7545(o)(1)(G)), as in effect on the date of the enactment of this section.

“(3) QUALIFIED CARBON DIOXIDE.—The term ‘qualified carbon dioxide’ means carbon dioxide captured from an industrial source which—

“(A) would otherwise be released into the atmosphere as industrial emission of greenhouse gas,

“(B) is measured at the source of capture and verified at the point of disposal or utilization, and

“(C) is captured and disposed or utilized within the United States (within the meaning of section 638(1)) or a possession of the United States (within the meaning of section 638(2)).

“(f) Final guidance.—Not later than January 1, 2023, the Secretary and the Administrator of the Environmental Protection Agency shall issue final guidance regarding implementation of this section, including calculation of greenhouse gas emission rates for qualified facilities and determination of clean electricity production credits under this section.

“(g) Special rules.—

“(1) ONLY PRODUCTION IN THE UNITED STATES TAKEN INTO ACCOUNT.—Consumption or sales shall be taken into account under this section only with respect to electricity the production of which is within—

“(A) the United States (within the meaning of section 638(1)), or

“(B) a possession of the United States (within the meaning of section 638(2)).

“(2) COMBINED HEAT AND POWER SYSTEM PROPERTY.—

“(A) IN GENERAL.—For purposes of subsection (a)—

“(i) the kilowatt hours of electricity produced by a taxpayer at a qualified facility shall include any production in the form of useful thermal energy by any combined heat and power system property within such facility, and

“(ii) the amount of greenhouse gases emitted into the atmosphere by such facility in the production of such useful thermal energy shall be included for purposes of determining the greenhouse gas emissions rate for such facility.

“(B) COMBINED HEAT AND POWER SYSTEM PROPERTY.—For purposes of this paragraph, the term ‘combined heat and power system property’ has the same meaning given such term by section 48(c)(3) (without regard to subparagraphs (A)(iv), (B), and (D) thereof).

“(C) CONVERSION FROM BTU TO KWH.—

“(i) IN GENERAL.—For purposes of subparagraph (A)(i), the amount of kilowatt hours of electricity produced in the form of useful thermal energy shall be equal to the quotient of—

“(I) the total useful thermal energy produced by the combined heat and power system property within the qualified facility, divided by

“(II) the heat rate for such facility.

“(ii) HEAT RATE.—For purposes of this subparagraph, the term ‘heat rate’ means the amount of energy used by the qualified facility to generate 1 kilowatt hour of electricity, expressed as British thermal units per net kilowatt hour generated.

“(3) PRODUCTION ATTRIBUTABLE TO THE TAXPAYER.—In the case of a qualified facility in which more than 1 person has an ownership interest, except to the extent provided in regulations prescribed by the Secretary, production from the facility shall be allocated among such persons in proportion to their respective ownership interests in the gross sales from such facility.

“(4) RELATED PERSONS.—Persons shall be treated as related to each other if such persons would be treated as a single employer under the regulations prescribed under section 52(b). In the case of a corporation which is a member of an affiliated group of corporations filing a consolidated return, such corporation shall be treated as selling electricity to an unrelated person if such electricity is sold to such a person by another member of such group.

“(5) 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.

“(6) ALLOCATION OF CREDIT TO PATRONS OF AGRICULTURAL COOPERATIVE.—

“(A) ELECTION TO ALLOCATE.—

“(i) IN GENERAL.—In the case of an eligible cooperative organization, any portion of the credit determined under subsection (a) for the taxable year may, at the election of the organization, be apportioned among patrons of the organization on the basis of the amount of business done by the patrons during 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. Such election shall not take effect unless the organization designates the apportionment as such in a written notice mailed to its patrons during the payment period described in section 1382(d).

“(B) TREATMENT OF ORGANIZATIONS AND PATRONS.—The amount of the credit apportioned to any 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, and

“(ii) shall be included in the amount determined under subsection (a) for the first taxable year of each patron ending on or after the last day of the payment period (as defined in section 1382(d)) for the taxable year of the organization or, if earlier, for the taxable year of each patron ending on or after the date on which the patron receives notice from the cooperative of the apportionment.

“(C) SPECIAL RULES FOR DECREASE IN CREDITS FOR TAXABLE YEAR.—If the amount of the credit of a cooperative organization determined under subsection (a) 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.

“(D) ELIGIBLE COOPERATIVE DEFINED.—For purposes of this section, the term ‘eligible cooperative’ means a cooperative organization described in section 1381(a) which is owned more than 50 percent by agricultural producers or by entities owned by agricultural producers. For this purpose an entity owned by an agricultural producer is one that is more than 50 percent owned by agricultural producers.

“(7) INCREASE IN CREDIT IN CERTAIN CASES.—

“(A) NASCENT CLEAN ENERGY TECHNOLOGY.—

“(i) IN GENERAL.—In the case of any qualified facility which generates electricity using a nascent clean energy technology, for purposes of determining the amount of the credit under subsection (a) with respect to any electricity produced by the taxpayer at such facility using such technology during the taxable year, the amount under paragraph (1) of such subsection shall be increased by an amount equal to 10 percent of the amount otherwise in effect under such paragraph (without application of subparagraph (B) or (C)).

“(ii) DEFINITION.—For purposes of this subparagraph, the term ‘nascent clean energy technology’ means any technology or method used for the production of electricity which, in the calendar year preceding the calendar year in which construction of the qualified facility began, achieved a market penetration level of less than 3 percent.

“(iii) MARKET PENETRATION LEVEL.—For purposes of this subparagraph, the term ‘market penetration level’ means, with respect to any calendar year, the amount equal to the greater of—

“(I) the amount (expressed as a percentage) equal to the quotient of—

“(aa) the sum of all electricity produced (expressed in terawatt hours) from the technology or method used for the production of electricity by all electricity generating facilities in the United States during such calendar year (as determined by the Secretary on the basis of data reported by the Energy Information Administration), divided by

“(bb) the total domestic power sector electricity production (expressed in terawatt hours) for such calendar year, or

“(II) the amount determined under this clause for the preceding calendar year with respect to such technology or method.

“(B) ENERGY COMMUNITIES.—

“(i) IN GENERAL.—In the case of any qualified facility which is located in an energy community, for purposes of determining the amount of the credit under subsection (a) with respect to any electricity produced by the taxpayer at such facility during the taxable year, the amount under paragraph (1) of such subsection shall be increased by an amount equal to 10 percent of the amount otherwise in effect under such paragraph (without application of subparagraph (A) or (C)).

“(ii) ENERGY COMMUNITY.—For purposes of this subparagraph, the term ‘energy community’ means a census tract—

“(I) in which—

“(aa) for the calendar year in which construction of the qualified facility began—

“(AA) not less than 5 percent of the employment in such tract is within the oil and gas sector, or

“(BB) an industrial facility is located which is mandated to report emissions of greenhouse gases under the Greenhouse Gas Reporting Program established under part 98 of title 40, Code of Federal Regulations,

“(bb) after December 31, 1999, a coal mine has closed, or

“(cc) after December 31, 2009, a coal-fired electric generating unit has been retired, or

“(II) which is immediately adjacent to any census tract described in subclause (I).

“(C) DOMESTIC CONTENT.—

“(i) IN GENERAL.—In the case of any qualified facility which satisfies the requirement under clause (ii)(I), for purposes of determining the amount of the credit under subsection (a) with respect to any electricity produced by the taxpayer at such facility during the taxable year, the amount under paragraph (1) of such subsection shall be increased by an amount equal to 10 percent of the amount otherwise in effect under such paragraph (without application of subparagraph (A) or (B)).

“(ii) REQUIREMENT.—

“(I) IN GENERAL.—Subject to clause (iii), the requirement described in this subclause with respect to any qualified facility is that, prior to the end of the taxable year in which such facility is placed in service, the taxpayer shall certify to the Secretary that, any steel, iron, or manufactured product used in the construction of such facility was produced in the United States.

“(II) STEEL AND IRON.—In the case of steel or iron, subclause (I) shall be applied in a manner consistent with section 661.5(b) of title 49, Code of Federal Regulations.

“(III) MANUFACTURED PRODUCT.—For purposes of subclause (I), a manufactured product shall be deemed to have been manufactured in the United States if not less than 55 percent of the total cost of the components of such product is attributable to components which are mined, produced, or manufactured in the United States.

“(iii) INTERNATIONAL AGREEMENTS.—This subparagraph shall be applied in a manner which is consistent with the obligations of the United States under international agreements.

“(8) CREDIT REDUCED FOR GRANTS, TAX-EXEMPT BONDS, SUBSIDIZED ENERGY FINANCING, AND OTHER CREDITS.—Rules similar to the rules under section 45(b)(3) shall apply for purposes of this section.

“(h) Election for direct payment.—

“(1) IN GENERAL.—The applicable percentage of the amount of any credit determined under subsection (a) with respect to any qualified facility for any taxable year during the period described in subsection (b)(1)(B) shall, at the election of the taxpayer, be treated as a payment equal to such amount which is made by the taxpayer against the tax imposed by chapter 1 for such taxable year.

“(2) FORM AND EFFECT OF ELECTION.—

“(A) IN GENERAL.—An election under paragraph (1) shall be made prior to the date on which the qualified facility is placed in service and in such manner as the Secretary may prescribe. Such election, once made, shall—

“(i) be irrevocable with respect to such qualified facility for the period described in subsection (b)(1)(B), and

“(ii) for any taxable year during such period, reduce the amount of the credit which would (but for this subsection) be allowable under this section with respect to such qualified facility for such taxable year to zero.

“(B) ADDITIONAL INFORMATION.—For purposes of an election under paragraph (1), the Secretary may require such information as the Secretary deems necessary for purposes of preventing duplication, fraud, or any improper payments under this subsection.

“(3) APPLICATION TO PARTNERSHIPS AND S CORPORATIONS.—In the case of a partnership or S corporation which makes an election under paragraph (1)—

“(A) such paragraph shall apply with respect to such partnership or corporation without regard to the fact that no tax is imposed by chapter 1 on such partnership or corporation, and

“(B) (i) in the case of a partnership, each partner's distributive share of the credit determined under subsection (a) with respect to the qualified facility shall be deemed to be zero, and

“(ii) in the case of a S corporation, each shareholder's pro rata share of the credit determined under subsection (a) with respect to the qualified facility shall be deemed to be zero.

“(4) CERTAIN ENTITIES TREATED AS TAXPAYERS.—In the case of an election under this subsection—

“(A) any State utility with a service obligation, as such terms are defined in section 217 of the Federal Power Act (as in effect on the date of the enactment of this subsection),

“(B) any mutual or cooperative electric company described in section 501(c)(12) or section 1381(a)(2)(C), or

“(C) an Indian tribal government (as defined in section 139E(c)(1)),

shall be treated as a taxpayer for purposes of this subsection and determining the amount of any credit under subsection (a).

“(5) EXCESS PAYMENT.—

“(A) IN GENERAL.—In the case of any payment made to a taxpayer under this subsection which the Secretary determines constitutes an excessive payment, the tax imposed on such taxpayer by chapter 1 for the taxable year in which such determination is made shall be increased by an amount equal to the sum of—

“(i) the amount of the excessive payment, plus

“(ii) an amount equal to 20 percent of the excessive payment.

“(B) REASONABLE CAUSE.—Subparagraph (A)(ii) shall not apply if the taxpayer demonstrates to the satisfaction of the Secretary that the excessive payment resulted from reasonable cause.

“(C) DEFINITION.—For purposes of this paragraph, the term ‘excessive payment’ means, with respect to a qualified facility for any taxable year, an amount equal to the excess of—

“(i) the amount of the payment made to the taxpayer under this subsection with respect to such facility for such taxable year, over

“(ii) the amount of the credit which (without application of this subsection) is otherwise allowable under this section with respect to such facility for such taxable year.

“(6) APPLICABLE PERCENTAGE.—For purposes of paragraph (1)—

“(A) IN GENERAL.—In the case of any qualified facility which satisfies the requirements under subsection (g)(7)(C)(ii) with respect to the construction of such facility, the applicable percentage shall be 100 percent.

“(B) PHASED DOMESTIC CONTENT REQUIREMENT.—Subject to subparagraph (C), in the case of any qualified facility which fails to satisfy the requirements under such subsection with respect to the construction of such facility, the applicable percentage shall be—

“(i) if construction of such facility began before January 1, 2024, 100 percent,

“(ii) if construction of such facility began in calendar year 2024, 90 percent,

“(iii) if construction of such facility began in calendar year 2025, 85 percent, and

“(iv) if construction of such facility began after December 31, 2025, 0 percent.

“(C) EXCEPTION.—If the Secretary determines that, for purposes of application of the requirements under subsection (g)(7)(C)(ii) with respect to the construction of the qualified facility—

“(i) their application would be inconsistent with the public interest,

“(ii) such materials and products are not produced in the United States in sufficient and reasonably available quantities and of a satisfactory quality, or

“(iii) inclusion of domestic material will increase the cost of the construction of the qualified facility by more than 25 percent,

the applicable percentage shall be 100 percent.”.

“(a) Investment credit for qualified property.—

“(1) IN GENERAL.—For purposes of section 46, the clean electricity investment credit for any taxable year is—

“(A) except as provided in subparagraph (B), an amount equal to 30 percent of the qualified investment for such taxable year with respect to—

“(i) any qualified facility, and

“(ii) any grid improvement property, and

“(B) in the case of a qualified facility which is a microgrid, an amount equal to the product of—

“(i) 30 percent of the qualified investment for such taxable year with respect to such microgrid, and

“(ii) the relative avoided emissions rate with respect to such microgrid (as determined under subsection (b)(3)(C)(iv)).

“(2) INCREASE IN CREDIT RATE IN CERTAIN CASES.—

“(A) DISADVANTAGED AND ENERGY COMMUNITIES.—

“(i) IN GENERAL.—In the case of—

“(I) any energy storage property or any qualified investment with respect to a qualified facility (with the exception of any such facility described in section 45U(b)(2)(B))—

“(aa) which is placed in service within a disadvantaged community or an energy community (as defined in section 45U(g)(7)(B)(ii)), and

“(bb) has a maximum net output of less than 5 megawatts, or

“(II) any qualified property which is not described in subclause (I) and is placed in service within an energy community,

for purposes applying paragraph (1) with respect to such property or investment, the percentage under subparagraph (A) of such paragraph (or, in the case of a microgrid, subparagraph (B)(i) of such paragraph), shall be increased by 10 percentage points.

“(ii) DISADVANTAGED COMMUNITY.—For purposes of this subparagraph, the term ‘disadvantaged community’ has the same meaning given the term ‘low-income community’ in section 45D(e)(1), as applied by substituting ‘60 percent’ for ‘80 percent’ each place it appears in subparagraph (B) thereof.

“(B) NASCENT CLEAN ENERGY TECHNOLOGY.—In the case of any qualified facility which generates electricity using a nascent clean energy technology (as defined in section 45U(g)(7)(A)(ii)), for purposes applying paragraph (1) with respect to any qualified investment with respect to such facility, the percentage under subparagraph (A) of such paragraph (or, in the case of a microgrid, subparagraph (B)(i) of such paragraph), shall be increased by 10 percentage points.

“(C) DOMESTIC CONTENT.—

“(i) IN GENERAL.—In the case of any qualified investment with respect to a qualified facility or with respect to grid improvement property which satisfies the requirement under clause (ii)(I), for purposes of applying paragraph (1) with respect to such qualified investment, the percentage under subparagraph (A) of such paragraph (or, in the case of a qualified investment with respect to a microgrid, subparagraph (B)(i) of such paragraph), shall be increased by 10 percentage points.

“(ii) REQUIREMENTS.—

“(I) IN GENERAL.—The requirement described in this subclause with respect to any qualified investment with respect to a qualified facility or with respect to grid improvement property is satisfied if the taxpayer certifies to the Secretary that—

“(aa) in the case of a qualified investment with respect to a qualified facility, any property used at such facility is composed of steel, iron, or manufactured products which were produced in the United States, and

“(bb) in the case of a qualified investment with respect to any grid improvement property, such property is composed of steel, iron, or manufactured products which were produced in the United States.

“(II) STEEL AND IRON.—In the case of steel or iron, subclause (I) shall be applied in a manner consistent with section 661.5(b) of title 49, Code of Federal Regulations.

“(III) MANUFACTURED PRODUCT.—For purposes of subclause (I), a manufactured product shall be deemed to have been manufactured in the United States if not less than 55 percent of the total cost of the components of such product is attributable to components which are mined, produced, or manufactured in the United States.

“(iii) INTERNATIONAL AGREEMENTS.—This subparagraph shall be applied in a manner which is consistent with the obligations of the United States under international agreements.

“(D) MAXIMUM CREDIT RATE.—Notwithstanding any adjustment or increase pursuant to this paragraph, the percentage under subparagraph (A) or (B)(i) of paragraph (1) shall not exceed 50 percent.

“(b) Qualified investment with respect to any qualified facility.—

“(1) IN GENERAL.—For purposes of subsection (a), the qualified investment with respect to any qualified facility for any taxable year is the sum of—

“(A) the basis of any qualified property placed in service by the taxpayer during such taxable year which is part of a qualified facility, plus

“(B) the amount of any expenditures which are—

“(i) paid or incurred by the taxpayer for qualified interconnection property—

“(I) in connection with a qualified facility which has a maximum net output of not greater than 5 megawatts, and

“(II) placed in service during the taxable year of the taxpayer, and

“(ii) properly chargeable to capital account of the taxpayer.

“(2) QUALIFIED PROPERTY.—The term ‘qualified property’ means property—

“(A) which is—

“(i) tangible personal property, or

“(ii) other tangible property (not including a building or its structural components), but only if such property is used as an integral part of the qualified facility,

“(B) with respect to which depreciation (or amortization in lieu of depreciation) is allowable, and

“(C) (i) the construction, reconstruction, or erection of which is completed by the taxpayer, or

“(ii) which is acquired by the taxpayer if the original use of such property commences with the taxpayer.

“(3) QUALIFIED FACILITY.—

“(A) IN GENERAL.—For purposes of this section, the term ‘qualified facility’ means a facility—

“(i) which is used for the generation of electricity,

“(ii) which is originally placed in service after December 31, 2022,

“(iii) for which the anticipated greenhouse gas emissions rate (as determined under subparagraph (B)(ii)) is not greater than zero, and

“(iv) in the case of any facility with a maximum net output equal to or greater than 1 megawatt, which—

“(I) satisfies the requirements of subparagraph (B)(iii), and

“(II) with respect to the construction of such facility, satisfies the requirements under section 501 of the Clean Energy for America Act.

“(B) ADDITIONAL RULES.—

“(i) EXPANSION OF FACILITY; INCREMENTAL PRODUCTION.—Rules similar to the rules of section 45U(b)(1)(C) shall apply for purposes of this paragraph.

“(ii) GREENHOUSE GAS EMISSIONS RATE.—Rules similar to the rules of section 45U(b)(2) shall apply for purposes of this paragraph.

“(iii) WAGE REQUIREMENTS.—

“(I) IN GENERAL.—The requirements described in this subclause with respect to any facility are that the taxpayer shall ensure that any laborers and mechanics employed by contractors and subcontractors in—

“(aa) the construction of such facility, or

“(bb) for any year during the 5-year period beginning on the date the facility is originally placed in service, the alteration or repair of such facility,

shall be paid wages at rates not less than the prevailing rates for construction, alteration, or repair of a similar character in the locality as determined by the Secretary of Labor, in accordance with subchapter IV of chapter 31 of title 40, United States Code.

“(II) CORRECTION AND PENALTY RELATED TO FAILURE TO SATISFY WAGE REQUIREMENTS.—For purposes of section 50(a), a taxpayer shall not be treated as failing to satisfy the requirements of this clause if such taxpayer meets requirements similar to the requirements of section 45U(b)(3)(B)(ii).

“(C) MICROGRIDS.—

“(i) IN GENERAL.—For purposes of this section, the term ‘qualified facility’ shall include any microgrid which satisfies the requirements under clauses (i), (ii), and (iv) of subparagraph (A).

“(ii) MICROGRID.—For purposes of this section, the term ‘microgrid’ means an interconnected system of distributed energy resources used for the generation of electricity which—

“(I) is contained within a clearly defined electrical boundary and has the ability to operate as a single and controllable entity,

“(II) has the ability to be managed and isolated from the applicable grid region in order to withstand larger disturbances and maintain the supply of electricity to connected infrastructure, and

“(III) has a maximum net output of not greater than 20 megawatts.

“(iii) APPLICABLE GRID REGION.—For purposes of this subparagraph, the term ‘applicable grid region’ means a set of power plants and transmission lines which are—

“(I) under the control of a single grid operator, and

“(II) interconnected to the microgrid.

“(iv) RELATIVE AVOIDED EMISSIONS RATE.—

“(I) IN GENERAL.—For purposes of subsection (a)(1)(B)(ii), the relative avoided emissions rate shall be the amount equal to the quotient of—

“(aa) the amount equal to the non-baseload output emissions rate for the applicable grid region minus the greenhouse gas emissions rate for the microgrid, divided by

“(bb) the non-baseload output emissions rate for the applicable grid region.

“(II) NON-BASELOAD OUTPUT EMISSIONS RATE.—

“(aa) IN GENERAL.—For purposes of this subparagraph, the term ‘non-baseload output emissions rate’ means the amount of greenhouse gases emitted into the atmosphere by the applicable grid region for the production of electricity (expressed as grams of CO₂e per KWh) above baseload.

“(bb) DETERMINATION.—The non-baseload output emissions rate for any applicable grid region shall be determined by the Administrator of the Environmental Protection Agency and the Secretary.

“(D) EXCLUSION.—The term ‘qualified facility’ shall not include any facility for which—

“(i) a renewable electricity production credit determined under section 45,

“(ii) an advanced nuclear power facility production credit determined under section 45J,

“(iii) a carbon oxide sequestration credit determined under section 45Q,

“(iv) a clean electricity production credit determined under section 45U, or

“(v) an energy credit determined under section 48,

is allowed under section 38 for the taxable year or any prior taxable year.

“(4) QUALIFIED INTERCONNECTION PROPERTY.—For purposes of this paragraph—

“(A) IN GENERAL.—The term ‘qualified interconnection property’ means, with respect to a qualified facility which is not a microgrid, any tangible property—

“(i) which is part of an addition, modification, or upgrade to a transmission system which is required at or beyond the point at which the qualified facility interconnects to such transmission system in order to accommodate such interconnection,

“(ii) (I) which is constructed, reconstructed, or erected by the taxpayer, or

“(II) for which the cost with respect to the construction, reconstruction, or erection of such property is paid or incurred by such taxpayer, and

“(iii) the original use of which, pursuant to an interconnection agreement, commences with the utility.

“(B) INTERCONNECTION AGREEMENT.—The term ‘interconnection agreement’ means an agreement entered into by a utility and the taxpayer for the purposes of interconnecting the qualified facility owned by such taxpayer to the transmission system of such utility.

“(C) TRANSMISSION SYSTEM.—The term ‘transmission system’ means the facilities owned, controlled, or operated by a utility which are used to provide electric transmission service.

“(D) UTILITY.—The term ‘utility’ means the owner or operator of an electrical transmission or distribution system which is subject to the regulatory authority of—

“(i) the Federal Energy Regulatory Commission, or

“(ii) a State public utility commission or other appropriate State agency.

“(5) COORDINATION WITH REHABILITATION CREDIT.—The qualified investment with respect to any qualified facility for any taxable year shall not include that portion of the basis of any property which is attributable to qualified rehabilitation expenditures (as defined in section 47(c)(2)).

“(6) DEFINITIONS.—For purposes of this subsection, the terms ‘CO2e per KWh’ and ‘greenhouse gas emissions rate’ have the same meaning given such terms under section 45U(b).

“(c) Qualified investment with respect to grid improvement property.—

“(1) IN GENERAL.—

“(A) QUALIFIED INVESTMENT.—For purposes of subsection (a), the qualified investment with respect to grid improvement property for any taxable year is the basis of any grid improvement property placed in service by the taxpayer during such taxable year.

“(B) GRID IMPROVEMENT PROPERTY.—For purposes of this section, the term ‘grid improvement property’ means any energy storage property or qualified transmission property which—

“(i) satisfies the requirements of paragraph (4), and

“(ii) with respect to the construction of such property, satisfies the requirements under section 501 of the Clean Energy for America Act.

“(2) ENERGY STORAGE PROPERTY.—For purposes of this subsection, the term ‘energy storage property’ means property—

“(A) which receives, stores, and delivers electricity, or energy for conversion to electricity, provided that such electricity is—

“(i) sold by the taxpayer to an unrelated person, or

“(ii) stored by the taxpayer for an unrelated person,

“(B) with respect to which depreciation (or amortization in lieu of depreciation) is allowable,

“(C) (i) the construction, reconstruction, or erection of which is completed by the taxpayer, or

“(ii) which is acquired by the taxpayer if the original use of such property commences with the taxpayer,

“(D) which has a capacity of not less than 5 kilowatt hours, and

“(E) which is placed in service after December 31, 2021.

“(3) QUALIFIED TRANSMISSION PROPERTY.—

“(A) IN GENERAL.—For purposes of this subsection, the term ‘qualified transmission property’ means property—

“(i) which is—

“(I) an overhead, submarine, or underground transmission property which is capable of transmitting electricity at a voltage of not less than 275 kilovolts, and

“(II) other equipment necessary for the operation of property described in clause (i), including equipment listed as ‘transmission plant’ in the Uniform System of Accounts for the Federal Energy Regulatory Commission under part 101 of subchapter C of chapter I of title 18, Code of Federal Regulations,

“(ii) which satisfies the requirements under subparagraphs (B), (C), and (E) of paragraph (2).

“(B) EXCLUSION.—The term ‘qualified transmission property’ shall not include any property used for distribution of electricity between substations and end-use customers.

“(4) WAGE REQUIREMENTS.—

“(A) IN GENERAL.—The requirements described in this subparagraph with respect to any property are that the taxpayer shall ensure that any laborers and mechanics employed by contractors and subcontractors in—

“(i) the construction of such property, or

“(ii) for any year during the 5-year period beginning on the date the property is originally placed in service, the alteration or repair of such property,

shall be paid wages at rates not less than the prevailing rates for construction, alteration, or repair of a similar character in the locality as determined by the Secretary of Labor, in accordance with subchapter IV of chapter 31 of title 40, United States Code.

“(B) CORRECTION AND PENALTY RELATED TO FAILURE TO SATISFY WAGE REQUIREMENTS.—For purposes of section 50(a), a taxpayer shall not be treated as failing to satisfy the requirements of this clause if such taxpayer meets requirements similar to the requirements of section 45U(b)(3)(B)(ii).

“(d) Special rules.—

“(1) CERTAIN PROGRESS EXPENDITURE RULES MADE APPLICABLE.—Rules similar to the rules of subsections (c)(4) and (d) of section 46 (as in effect on the day before the date of the enactment of the Revenue Reconciliation Act of 1990) shall apply for purposes of subsection (a).

“(2) SPECIAL RULE FOR PROPERTY FINANCED BY SUBSIDIZED ENERGY FINANCING OR INDUSTRIAL DEVELOPMENT BONDS.—Rules similar to the rules of section 48(a)(4) shall apply for purposes of this section.

“(e) Credit phase-Out.—

“(1) IN GENERAL.—If the Secretary, the Secretary of Energy, and the Administrator of the Environmental Protection Agency determine that the annual greenhouse gas emissions from the production of electricity in the United States are equal to or less than 25 percent of the annual greenhouse gas emissions from the production of electricity in the United States for calendar year 2021, the amount of the clean electricity investment credit under subsection (a) for any qualified investment with respect to any qualified facility or grid improvement property the construction of which begins during a calendar year described in paragraph (2) shall be equal to the product of—

“(A) the amount of the credit determined under subsection (a) without regard to this subsection, multiplied by

“(B) the phase-out percentage under paragraph (2).

“(2) PHASE-OUT PERCENTAGE.—The phase-out percentage under this paragraph is equal to—

“(A) for any qualified investment with respect to any qualified facility or grid improvement property the construction of which begins during the first calendar year following the calendar year in which the determination described in paragraph (1) is made, 100 percent,

“(B) for any qualified investment with respect to any qualified facility or grid improvement property the construction of which begins during the second calendar year following such determination year, 75 percent,

“(C) for any qualified investment with respect to any qualified facility or grid improvement property the construction of which begins during the third calendar year following such determination year, 50 percent, and

“(D) for any qualified investment with respect to any qualified facility or grid improvement property the construction of which begins during any calendar year subsequent to the year described in subparagraph (C), 0 percent.

“(f) Greenhouse gas.—In this section, the term ‘greenhouse gas’ has the same meaning given such term under section 45U(e)(2).

“(g) Recapture of credit.—For purposes of section 50, if the Secretary and the Administrator of the Environmental Protection Agency determine that the greenhouse gas emissions rate for a qualified facility is significantly higher than the anticipated greenhouse gas emissions rate claimed by the taxpayer for purposes of the clean electricity investment credit under this section, the facility or equipment shall cease to be investment credit property in the taxable year in which the determination is made.

“(h) Final guidance.—Not later than January 1, 2023, the Secretary and the Administrator of the Environmental Protection Agency shall issue final guidance regarding implementation of this section.

“(i) Election for direct payment.—

“(1) IN GENERAL.—In the case of any qualified property or grid improvement property placed in service during any taxable year, the applicable percentage of the amount of any credit determined under subsection (a) with respect to such property for such taxable year shall, at the election of the taxpayer, be treated as a payment equal to such amount which is made by the taxpayer against the tax imposed by chapter 1 for such taxable year (regardless of whether such tax would have been on such taxpayer).

“(2) FORM AND EFFECT OF ELECTION.—

“(A) IN GENERAL.—An election under paragraph (1) shall be made prior to the date on which the qualified property or grid improvement property is placed in service and in such manner as the Secretary may prescribe. Such election, once made, shall—

“(i) be irrevocable with respect to the qualified property or grid improvement property to which such election applies, and

“(ii) reduce the amount of the credit which would (but for this subsection) be allowable under this section with respect to such property for the taxable year in which such property is placed in service to zero.

“(B) ADDITIONAL INFORMATION.—For purposes of an election under paragraph (1), the Secretary may require such information as the Secretary deems necessary for purposes of preventing duplication, fraud, or any improper payments under this subsection.

“(3) APPLICATION TO PARTNERSHIPS AND S CORPORATIONS; EXCESS PAYMENTS.—Rules similar to the rules of paragraphs (3) and (5) of section 45U(h) shall apply for purposes of this subsection.

“(4) SPECIAL RULES FOR CERTAIN ENTITIES.—

“(A) ELIGIBILITY OF CERTAIN PROPERTY.—For purposes of this subsection, paragraphs (3) and (4) of section 50(b) shall not apply with respect to—

“(i) any State utility with a service obligation, as such terms are defined in section 217 of the Federal Power Act (as in effect on the date of the enactment of this subsection),

“(ii) any mutual or cooperative electric company described in section 501(c)(12) or section 1381(a)(2)(C), or

“(iii) an Indian tribal government (as defined in section 139E(c)(1)).

“(B) CERTAIN ENTITIES TREATED AS TAXPAYERS.—In the case of an election under this subsection, any entity described in clause (i), (ii), or (iii) of subparagraph (A) shall be treated as a taxpayer for purposes of this subsection and determining the amount of any credit under subsection (a).

“(5) APPLICABLE PERCENTAGE.—For purposes of paragraph (1)—

“(A) IN GENERAL.—In the case of any property which satisfies the requirements under subsection (a)(2)(C)(ii) with respect to the construction of such property, the applicable percentage shall be 100 percent.

“(B) PHASED DOMESTIC CONTENT REQUIREMENT.—Subject to subparagraph (C), in the case of any property which fails to satisfy the requirements under such subsection with respect to the construction of such property, the applicable percentage shall be—

“(i) if construction of such property began before January 1, 2024, 100 percent,

“(ii) if construction of such property began in calendar year 2024, 90 percent,

“(iii) if construction of such property began in calendar year 2025, 85 percent, and

“(iv) if construction of such property began after December 31, 2025, 0 percent.

“(C) EXCEPTION.—If the Secretary determines that, for purposes of application of the requirements under subsection (a)(2)(C)(ii) with respect to the construction of such property—

“(i) their application would be inconsistent with the public interest,

“(ii) such materials and products are not produced in the United States in sufficient and reasonably available quantities and of a satisfactory quality, or

“(iii) inclusion of domestic material will increase the cost of the construction of the property by more than 25 percent,

the applicable percentage shall be 100 percent.”.

“(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 30 percent of the expenditures made by the taxpayer for any qualified property and any energy storage property which is—

“(1) for use in connection with a dwelling unit which is located in the United States and used as a residence by the taxpayer, and

“(2) placed in service during such taxable year.

“(b) Qualified property.—

“(1) IN GENERAL.—The term ‘qualified property’ means property—

“(A) which is tangible personal property,

“(B) which is used for the generation of electricity,

“(C) which is constructed, reconstructed, erected, or acquired by the taxpayer,

“(D) the original use of which commences with the taxpayer,

“(E) which is originally placed in service after December 31, 2022, and

“(F) for which the anticipated greenhouse gas emissions rate (as determined under paragraph (2)) is not greater than zero.

“(2) ESTABLISHMENT OF EMISSIONS RATES FOR QUALIFIED PROPERTY.—

“(A) IN GENERAL.—The Secretary and the Administrator of the Environmental Protection Agency, shall establish greenhouse gas emissions rates for types or categories of qualified property which are for use in a dwelling unit, which a taxpayer shall use for purposes of this section.

“(B) PUBLISHING EMISSIONS RATES.—The Secretary shall publish a table that sets forth the greenhouse gas emissions rates for similar types or categories of qualified property.

“(c) Energy storage property.—The term ‘energy storage property’ means property which—

“(1) receives, stores, and delivers electricity or energy for conversion to electricity which is consumed or sold by the taxpayer,

“(2) is equipped with a metering device which is owned and operated by an unrelated person,

“(3) has a capacity of not less than 3 kilowatt hours, and

“(4) satisfies the requirements under subparagraphs (A), (C), (D), and (E) of subsection (b)(1).

“(d) Carryforward of unused credit.—

“(1) IN GENERAL.—If the credit allowable under subsection (a) exceeds the applicable tax limit, such excess shall be carried to each of the 3 succeeding taxable years and added to the credit allowable under subsection (a) for such succeeding taxable year.

“(2) LIMITATION.—The amount of the unused credit which may be taken into account under paragraph (1) for any taxable year shall not exceed the amount (if any) by which the applicable tax limit for such taxable year exceeds the sum of—

“(A) the credit allowable under subsection (a) for which such taxable year determined without regard to this subsection, and

“(B) the amounts which, by reason of this subsection, are carried to such taxable year and are attributable to taxable years before the unused credit year.

“(3) APPLICABLE TAX LIMIT.—For purposes of this subsection, the term ‘applicable tax limit’ means 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).

“(e) Credit phase-Out.—

“(1) IN GENERAL.—If the Secretary, the Secretary of Energy, and the Administrator of the Environmental Protection Agency determine that the annual greenhouse gas emissions from the production of electricity in the United States are equal to or less than the percentage specified in section 48D(e), the amount of the credit allowable under subsection (a) for any qualified property or energy storage property placed in service during a calendar year described in paragraph (2) shall be equal to the product of—

“(A) the amount of the credit determined under subsection (a) without regard to this subsection, multiplied by

“(B) the phase-out percentage under paragraph (2).

“(2) PHASE-OUT PERCENTAGE.—The phase-out percentage under this paragraph is equal to—

“(A) for property placed in service during the first calendar year following the calendar year in which the determination described in paragraph (1) is made, 100 percent,

“(B) for property placed in service during the second calendar year following such determination year, 75 percent,

“(C) for property placed in service during the third calendar year following such determination year, 50 percent, and

“(D) for property placed in service during any calendar year subsequent to the year described in subparagraph (C), 0 percent.

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

“(1) LABOR COSTS.—Expenditures for labor costs properly allocable to the onsite preparation, assembly, or original installation of the qualified property or energy storage property and for piping or wiring to interconnect such property to the dwelling unit shall be taken into account for purposes of this section.

“(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.—If less than 80 percent of the use of a property is for nonbusiness purposes, only that portion of the expenditures for such property which is properly allocable to use for nonbusiness purposes shall be taken into account.

“(5) COORDINATION WITH OTHER CREDITS.—The terms ‘qualified property’ and ‘energy storage property’ shall not include any property for which a credit is allowed under section 25D for any expenditure with respect to such property.

“(g) Basis adjustment.—For purposes of this subtitle, if a credit is allowed under this section for any expenditures with respect to any property, the increase in the basis of such property which would (but for this subsection) result from such expenditures shall be reduced by the amount of the credit so allowed.

“(h) Final guidance.—Not later than January 1, 2023, the Secretary and the Administrator of the Environmental Protection Agency shall issue final guidance regarding implementation of this section, including calculation of greenhouse gas emission rates for qualified property and determination of residential clean electricity property credits under this section.”.

“(a) Amount of credit.—

“(1) IN GENERAL.—For purposes of section 38, the clean fuel production credit for any taxable year is an amount equal to—

“(A) for any transportation fuel sold during any calendar year ending before January 1, 2030, an amount equal to the product of—

“(i) $1.00 per gallon (or gallon equivalent) with respect to any transportation fuel which is—

“(I) produced by the taxpayer at a qualified facility, and

“(II) sold by the taxpayer in a manner described in paragraph (4), and

“(ii) the emissions factor for such fuel (as determined under subsection (b)), and

“(B) for any transportation fuel which is sold during any calendar year beginning after December 31, 2029, and which has an emissions rate equal to or less than zero, an amount equal to the applicable amount (as determined under paragraph (2)) per gallon (or gallon equivalent) with respect to any transportation fuel which is—

“(i) produced by the taxpayer at a qualified facility, and

“(ii) sold by the taxpayer in a manner described in paragraph (4).

“(2) APPLICABLE AMOUNT.—For purposes of paragraph (1)(B), the applicable amount with respect to any transportation fuel shall be an amount equal to $1.00 increased by 10 cents for every kilogram of CO₂e per mmBTU (or fraction thereof) for which the emissions rate for such fuel is below zero.

“(3) SPECIAL RATE FOR SUSTAINABLE AVIATION FUEL.—

“(A) IN GENERAL.—In the case of an transportation fuel which is sustainable aviation fuel, paragraphs (1)(A)(i) and (2) shall each be applied by substituting ‘$2.00’ for ‘$1.00’.

“(B) SUSTAINABLE AVIATION FUEL.—For purposes of this subparagraph (A), the term ‘sustainable aviation fuel’ means liquid fuel which is sold for use in, or used in, an aircraft and which—

“(i) consists of synthesized hydrocarbons,

“(ii) meets the requirements of—

“(I) ASTM International Standard D7566, or

“(II) the Fischer Tropsch provisions of ASTM International Standard D1655, Annex A1,

“(iii) is derived from—

“(I) biomass (as such term is defined in section 45K(c)(3)), or

“(II) electrolysis powered by renewable energy resources, or

“(III) carbon oxides captured from an industrial source or from the ambient air, and

“(iv) is not derived from palm fatty acid distillates.

“(4) SALE.—For purposes of paragraph (1), the transportation fuel is sold in a manner described in this paragraph if such fuel is sold by the taxpayer to an unrelated person—

“(A) for use by such person in the production of a fuel mixture,

“(B) for use by such person in a trade or business, or

“(C) who sells such fuel at retail to another person and places such fuel in the fuel tank of such other person.

“(5) ROUNDING.—If any amount determined under paragraph (1)(A) or (2) is not a multiple of 0.1 cent, such amount shall be rounded to the nearest multiple of 0.1 cent.

“(b) Emissions factors.—

“(1) EMISSIONS FACTOR.—

“(A) CALCULATION.—

“(i) IN GENERAL.—The emissions factor of a transportation fuel shall be an amount equal to the quotient of—

“(I) an amount equal to—

“(aa) the baseline emissions rate, minus

“(bb) the emissions rate for such fuel, divided by

“(II) the baseline emissions rate.

“(B) BASELINE EMISSIONS RATE.—For purposes of this paragraph, the term ‘baseline emissions rate’ means—

“(i) for any calendar year ending before January 1, 2026, 75 kilograms of CO₂e per mmBTU,

“(ii) for calendar years 2026 and 2027, 50 kilograms of CO₂e per mmBTU, and

“(iii) for calendar years 2028 and 2029, 25 kilograms of CO₂e per mmBTU.

“(C) ESTABLISHMENT OF EMISSIONS RATE.—The Secretary and the Secretary of Energy shall establish the emissions rate for similar types and categories of transportation fuels based on the amount of lifecycle greenhouse gas emissions (as described in section 211(o)(1)(H) of the Clean Air Act (42 U.S.C. 7545(o)(1)(H)), as in effect on the date of the enactment of this section) for such fuels, expressed as kilograms of CO₂e per mmBTU, which a taxpayer shall use for purposes of this section.

“(D) ROUNDING OF EMISSIONS RATE.—The Secretary may round the emissions rates under subparagraph (B) to the nearest multiple of 5 kilograms of CO₂e per mmBTU, except that, in the case of an emissions rate that is less than 2.5 kilograms of CO₂e per mmBTU, the Secretary may round such rate to zero.

“(E) PROVISIONAL EMISSIONS RATE.—

“(i) IN GENERAL.—In the case of any transportation fuel for which an emissions rate has not been established by under subparagraph (C), a taxpayer producing such fuel may file a petition with the Secretary and the Secretary of Energy for determination of the emissions rate with respect to such fuel.

“(ii) ESTABLISHMENT OF PROVISIONAL AND FINAL EMISSIONS RATE.—In the case of a transportation fuel for which a petition described in clause (i) has been filed, the Secretary and the Secretary of Energy shall—

“(I) not later than 12 months after the date on which the petition was filed, provide a provisional emissions rate for such fuel which a taxpayer shall use for purposes of this section, and

“(II) not later than 24 months after the date on which the petition was filed, establish the emissions rate for such fuel.

“(F) ROUNDING.—If any amount determined under subparagraph (A) is not a multiple of 0.1, such amount shall be rounded to the nearest multiple of 0.1.

“(2) PUBLISHING EMISSIONS RATE.—The Secretary shall publish annually a table that sets forth the emissions rate (as established pursuant to paragraph (1)) for similar types and categories of transportation fuels.

“(c) Inflation adjustment.—

“(1) IN GENERAL.—In the case of calendar years beginning after 2023, the $1.00 amount in paragraphs (1)(A)(i) and (2) of subsection (a) and the $2.00 amount in subsection (a)(3) shall each be adjusted by multiplying such amount by the inflation adjustment factor for the calendar year in which the sale or use of the transportation fuel occurs. If any amount as increased under the preceding sentence is not a multiple of 1 cent, such amount shall be rounded to the nearest multiple of 1 cent.

“(2) INFLATION ADJUSTMENT FACTOR.—For purposes of paragraph (1), the inflation adjustment factor shall be the inflation adjustment factor determined and published by the Secretary pursuant to section 45U(c), determined by substituting ‘calendar year 2022’ for ‘calendar year 1992’ in paragraph (3) thereof.

“(d) Credit phase-Out.—

“(1) IN GENERAL.—If the Secretary and the Administrator of the Environmental Protection Agency determine that the greenhouse gas emissions from the transportation of persons and goods annually in the United States are equal to or less than 25 percent of the greenhouse gas emissions from the transportation of persons and goods in the United States during calendar year 2021, the amount of the clean fuel production credit under this section shall be determined by substituting the applicable amount (as determined under paragraph (2)(A)) for the dollar amount applicable under paragraphs (1)(A)(i) and (2) of subsection (a).

“(2) APPLICABLE DOLLAR AMOUNT.—

“(A) IN GENERAL.—The applicable amount for any taxable year described in subparagraph (B) shall be an amount equal to the product of—

“(i) the dollar amount applicable under paragraphs (1)(A)(i) and (2) of subsection (a) (as adjusted by subsection (c)), multiplied by

“(ii) the phase-out percentage under subparagraph (B).

“(B) PHASE-OUT PERCENTAGE.—The phase-out percentage under this subparagraph is equal to—

“(i) for any taxable year beginning in the first calendar year following the calendar year in which the determination described in paragraph (1) is made, 100 percent,

“(ii) for any taxable year beginning in the second calendar year following such determination year, 75 percent,

“(iii) for any taxable year beginning in the third calendar year following such determination year, 50 percent, and

“(iv) for any taxable year beginning in any calendar year subsequent to the year described in clause (iii), 0 percent.

“(e) Definitions.—In this section:

“(1) mmBTU.—The term ‘mmBTU’ means 1,000,000 British thermal units.

“(2) CO₂e.—The term ‘CO₂e’ means, with respect to any greenhouse gas, the equivalent carbon dioxide (as determined based on relative global warming potential).

“(3) GREENHOUSE GAS.—The term ‘greenhouse gas’ has the same meaning given that term under section 211(o)(1)(G) of the Clean Air Act (42 U.S.C. 7545(o)(1)(G)), as in effect on the date of the enactment of this section.

“(4) QUALIFIED FACILITY.—

“(A) IN GENERAL.—The term ‘qualified facility’ means a facility—

“(i) used for the production of transportation fuels, and

“(ii) which—

“(I) subject to clause (ii) of subparagraph (B), satisfies the requirements under clause (i) of such subparagraph, and

“(II) with respect to the construction of such facility, satisfies the requirements under section 501 of the Clean Energy for America Act.

Clause (ii)(II) shall not apply to any facility placed in service before January 1, 2023.

“(B) WAGE REQUIREMENTS.—

“(i) IN GENERAL.—The requirements described in this subparagraph with respect to any facility are that the taxpayer shall ensure that any laborers and mechanics employed by contractors and subcontractors in—

“(I) the construction of such facility, or

“(II) for any year described in subsection (a)(1) for which the credit under this section is claimed, the alteration or repair of such facility,

shall be paid wages at rates not less than the prevailing rates for construction, alteration, or repair of a similar character in the locality as determined by the Secretary of Labor, in accordance with subchapter IV of chapter 31 of title 40, United States Code.

“(ii) FAILURE TO SATISFY WAGE REQUIREMENTS; CORRECTION AND PENALTY.—In the case of any taxpayer which fails to satisfy the requirement under clause (i) with respect to the construction of any facility or the alteration or repair of such facility in any year during the period described in clause (i)(II), rules similar to the rules of clauses (i) and (ii) of section 45U(b)(3)(B) shall apply for purposes of this subparagraph.

“(iii) SPECIAL RULE FOR FACILITIES PLACED IN SERVICE BEFORE JANUARY 1, 2023.—In the case of any facility placed in service before January 1, 2023—

“(I) clause (i)(I) shall not apply, and

“(II) clause (ii) shall be applied without regard to the phrase ‘the construction of any facility or’.

“(5) TRANSPORTATION FUEL.—The term ‘transportation fuel’ means a fuel which is suitable for use as a fuel in a highway vehicle or aircraft.

“(f) Final guidance.—Not later than January 1, 2023, the Secretary and the Secretary of Energy shall jointly issue final guidance regarding implementation of this section, including calculation of emissions factors for transportation fuel, the table described in subsection (b)(2), and the determination of clean fuel production credits under this section.

“(g) Special rules.—

“(1) ONLY REGISTERED PRODUCTION IN THE UNITED STATES TAKEN INTO ACCOUNT.—

“(A) IN GENERAL.—No clean fuel production credit shall be determined under subsection (a) with respect to any transportation fuel unless—

“(i) the taxpayer is registered as a producer of clean fuel under section 4101 at the time of production, and

“(ii) such fuel is produced in the United States.

“(B) UNITED STATES.—For purposes of this paragraph, the term ‘United States’ includes any possession of the United States.

“(2) PRODUCTION ATTRIBUTABLE TO THE TAXPAYER.—In the case of a facility in which more than 1 person has an ownership interest, except to the extent provided in regulations prescribed by the Secretary, production from the facility shall be allocated among such persons in proportion to their respective ownership interests in the gross sales from such facility.

“(3) RELATED PERSONS.—Persons shall be treated as related to each other if such persons would be treated as a single employer under the regulations prescribed under section 52(b). In the case of a corporation which is a member of an affiliated group of corporations filing a consolidated return, such corporation shall be treated as selling fuel to an unrelated person if such fuel is sold to such a person by another member of such group.

“(4) 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.

“(5) ALLOCATION OF CREDIT TO PATRONS OF AGRICULTURAL COOPERATIVE.—

“(A) ELECTION TO ALLOCATE.—

“(i) IN GENERAL.—In the case of an eligible cooperative organization, any portion of the credit determined under subsection (a) for the taxable year may, at the election of the organization, be apportioned among patrons of the organization on the basis of the amount of business done by the patrons during 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. Such election shall not take effect unless the organization designates the apportionment as such in a written notice mailed to its patrons during the payment period described in section 1382(d).

“(B) TREATMENT OF ORGANIZATIONS AND PATRONS.—The amount of the credit apportioned to any 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, and

“(ii) shall be included in the amount determined under subsection (a) for the first taxable year of each patron ending on or after the last day of the payment period (as defined in section 1382(d)) for the taxable year of the organization or, if earlier, for the taxable year of each patron ending on or after the date on which the patron receives notice from the cooperative of the apportionment.

“(C) SPECIAL RULES FOR DECREASE IN CREDITS FOR TAXABLE YEAR.—If the amount of the credit of a cooperative organization determined under subsection (a) 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.

“(D) ELIGIBLE COOPERATIVE DEFINED.—For purposes of this section the term ‘eligible cooperative’ means a cooperative organization described in section 1381(a) which is owned more than 50 percent by agricultural producers or by entities owned by agricultural producers. For this purpose an entity owned by an agricultural producer is one that is more than 50 percent owned by agricultural producers.”.

“(a) In general.—

“(1) CREDIT AMOUNT.—For purposes of section 38, the sustainable aviation fuel credit for the taxable year is, with respect to any sale or use of a qualified mixture which occurs during such taxable year, an amount equal to the product of—

“(A) the number of gallons of sustainable aviation fuel in such mixture, multiplied by

“(B) the sum of—

“(i) $1.50, plus

“(ii) the applicable supplementary credit amount with respect to the sustainable aviation fuel.

“(2) APPLICABLE SUPPLEMENTARY CREDIT AMOUNT.—

“(A) IN GENERAL.—For purposes of this section, the applicable supplementary credit amount means, with respect to any sustainable aviation fuel, an amount equal to $0.01 for every percentage point by which the lifecycle greenhouse gas emissions reduction percentage with respect to such fuel exceeds 50 percent.

“(B) LIMITATION.—In no event shall the applicable supplementary credit amount exceed $0.50.

“(b) Qualified mixture.—For purposes of this section—

“(1) IN GENERAL.—The term ‘qualified mixture’ means a mixture of sustainable aviation fuel and kerosene if—

“(A) such mixture is produced in the United States by a taxpayer, and

“(B) such mixture is—

“(i) sold for use in an aircraft, or

“(ii) used by the taxpayer in an aircraft.

“(2) SALE OR USE MUST BE IN TRADE OR BUSINESS, ETC.—Sustainable aviation fuel used in the production of a qualified mixture shall be taken into account—

“(A) only if the sale or use described in paragraph (1) is in a trade or business of the taxpayer, and

“(B) for the taxable year in which such sale or use occurs.

“(3) FUELING MUST BE IN THE UNITED STATES.—A qualified mixture shall not be treated as used or sold for use in an aircraft unless the transfer of such mixture to the fuel tank of such aircraft occurs in the United States.

“(4) UNITED STATES.—For purposes of this subsection, the term ‘United States’ includes any possession of the United States.

“(c) Sustainable aviation fuel.—For purposes of this section, the term ‘sustainable aviation fuel’ means liquid fuel—

“(1) which—

“(A) consists of synthesized hydrocarbons,

“(B) meets the requirements of—

“(i) ASTM International Standard D7566, or

“(ii) the Fischer Tropsch provisions of ASTM International Standard D1655, Annex A1,

“(C) is derived from—

“(i) biomass (as such term is defined in section 45K(c)(3)), or

“(ii) electrolysis powered by renewable energy resources, or

“(iii) carbon oxides captured from an industrial source or from the ambient air, and

“(D) is not derived from palm fatty acid distillates, and

“(2) which has been certified by the producer of such fuel in accordance with subsection (d) as having lifecycle greenhouse gas emissions that are equal to or less than 50 percent of the lifecycle greenhouse gas emissions for petroleum-based jet fuel.

“(d) Certification requirements.—A certification meet the requirements of this subsection if such certification is based on a method which—

“(1) demonstrates that the fuel conforms with—

“(A) the sustainability criteria of the Carbon Offsetting and Reduction Scheme for International Aviation, and

“(B) the traceability and information transmission requirements approved by the International Civil Aviation Organization with the agreement of the United States,

“(2) takes into account all elements used to determine lifecycle emissions by the International Civil Aviation Organization, and

“(3) is approved by—

“(A) the International Civil Aviation Organization, or

“(B) the Secretary and Administrator of the Environmental Protection Agency.

“(e) Time limit for adoption of new sustainable aviation fuel emissions reduction test.—For purposes of subparagraph (B) of subsection (d)(3), the Secretary and the Administrator of the Environmental Protection Agency shall, within 24 months after the date of the enactment of this section, adopt at least one method for testing lifecycle greenhouse gas emissions that meets the requirements of such subsection.

“(f) Certification of sustainable aviation fuel.—No credit shall be allowed under this section with respect to any sustainable aviation fuel unless the taxpayer obtains a certification (in such form and manner as prescribed by the Secretary) from the producer or importer of the sustainable aviation fuel which identifies the product produced and the percentage of sustainable aviation fuel in the product.

“(g) Termination.—This section shall not apply to any sale or use after December 31, 2022.”.

“(a) In general.—For purposes of section 38, the qualified commercial electric vehicle credit for any taxable year is an amount equal to the sum of the credit amounts determined under subsection (b) with respect to each qualified commercial electric vehicle placed in service by the taxpayer during the taxable year.

“(b) Per vehicle amount.—

“(1) IN GENERAL.—The amount determined under this subsection with respect to any qualified commercial electric vehicle shall be equal to the lesser of—

“(A) 30 percent of the basis of such vehicle, or

“(B) the incremental cost of such vehicle.

“(2) INCREMENTAL COST.—

“(A) IN GENERAL.—For purposes of paragraph (1)(B), the incremental cost of any qualified commercial electric vehicle is an amount equal to the excess of the purchase price for such vehicle over such price for a comparable vehicle.

“(B) COMPARABLE VEHICLE.—For purposes of this paragraph, the term ‘comparable vehicle’ means, with respect to any qualified commercial electric vehicle, any vehicle which is powered solely by a gasoline or diesel internal combustion engine and which is comparable in weight, size, and use to such vehicle.

“(C) COMPARATIVE PRICE.— For purposes of subparagraph (A), the Secretary and the Secretary of Transportation shall publish an annual list of prices of various types and classes of commercial vehicles described in subparagraph (B).

“(3) EXCLUSION.—For purposes of paragraph (1)(A), the basis of any qualified commercial electric vehicle which is a qualified electric transportation option shall not include any cost relating to any component or feature which—

“(A) is not integral to the vehicle, or

“(B) does not contribute to improving the efficiency or range of the electric propulsion of the vehicle.

“(c) Qualified commercial electric vehicle.—For purposes of this section—

“(1) IN GENERAL.—The term ‘qualified commercial electric vehicle’ means—

“(A) any vehicle which—

“(i) meets the requirements of subparagraphs (A), (B), (C), (D), and (G) of section 36C(c)(1),

“(ii) is primarily propelled by an electric motor which draws electricity from a battery which—

“(I) has a capacity of not less than 10 kilowatt hours, and

“(II) is capable of being recharged from an external source of electricity, and

“(iii) is of a character subject to the allowance for depreciation, and

“(B) any qualified electric transportation option.

“(2) QUALIFIED ELECTRIC TRANSPORTATION OPTION.—

“(A) IN GENERAL.—The term ‘qualified electric transportation option’ means any vehicle used in any manner of transportation—

“(i) the original use of which commences with the taxpayer,

“(ii) which is acquired for use or lease by the taxpayer and not for resale,

“(iii) which is capable of moving passengers, cargo, or property,

“(iv) which is powered by an integrated, on-board electric propulsion system which—

“(I) is the primary source of propulsion,

“(II) is capable of powering the vehicle (including any of its components and accessories) for not less than ²⁄3 of the maximum operating period between recharging or refueling of such vehicle, and

“(III) in the case of a vehicle which derives any of its power from the on-board combustion of a fuel, uses a renewable fuel,

“(v) which was manufactured for sale in commercial quantities with a reasonable expectation of profit,

“(vi) which is in compliance with any applicable safety or air quality standards, as determined by the Secretary, the Secretary of Transportation, the Secretary of Homeland Security, and the Administrator of the Environmental Protection Agency, and

“(vii) which is of a character subject to the allowance for depreciation.

“(B) ON-BOARD ELECTRIC PROPULSION SYSTEM.—For purposes of this paragraph, the term ‘on-board electric propulsion system’ means—

“(i) 1 or more on-board traction batteries which—

“(I) are integrated or swappable, and

“(II) have an aggregate capacity (as defined in subsection (d)(4)) of not less than 10 kilowatt hours, or

“(ii) an on-board power source other than a battery with an electrical output capacity equivalent of not less than 10 kilowatt hours, as determined by the Secretary.

“(C) RENEWABLE FUEL.—For purposes of this paragraph, the term ‘renewable fuel’ means any fuel at least 85 percent of the volume of which consists of one or more of the following:

“(i) Ethanol.

“(ii) Biodiesel (as defined in section 40A(d)(1)).

“(iii) Advanced biofuel (as defined in section 211(o)(1)(B) of the Clean Air Act (42 U.S.C. 7545(o)(1)(B))).

“(iv) Renewable natural gas.

“(v) Hydrogen.

“(d) Special rules.—

“(1) IN GENERAL.—Rules similar to the rules under subsection (d) of section 36C shall apply for purposes of this section.

“(2) PROPERTY USED BY TAX-EXEMPT ENTITY.—In the case of a vehicle the use of which is described in paragraph (3) or (4) of section 50(b) and which is not subject to a lease, the person who sold such vehicle to the person or entity using such vehicle shall be treated as the taxpayer that placed such vehicle in service, but only if such person clearly discloses to such person or entity in a document the amount of any credit allowable under subsection (a) with respect to such vehicle.

“(e) Credit phase-out.—

“(1) IN GENERAL.—Following a determination by the Secretary and the Secretary of Transportation that total annual sales of qualified commercial electric vehicles in the United States are greater than 50 percent of total annual sales of new commercial vehicles in the United States, the amount of the credit allowed under this section for any qualified commercial electric vehicle acquired during a calendar year described in paragraph (2) shall be equal to the product of—

“(A) the amount of the credit determined under subsection (a) without regard to this subsection, multiplied by

“(B) the phase-out percentage under paragraph (2).

“(2) PHASE-OUT PERCENTAGE.—The phase-out percentage under this paragraph is equal to—

“(A) for a vehicle acquired during the first calendar year following the calendar year in which the determination described in paragraph (1) is made, 100 percent,

“(B) for a vehicle acquired during the second calendar year following such determination year, 75 percent,

“(C) for a vehicle acquired during the third calendar year following such determination year, 50 percent, and

“(D) for a vehicle acquired during any calendar year subsequent to the year described in subparagraph (C), 0 percent.

“(f) Reporting requirement.—The person who sells or leases any qualified commercial electric vehicle to the taxpayer shall furnish a report to the taxpayer and to the Secretary, at such time and in such manner as the Secretary shall provide, containing—

“(1) the taxpayer’s name and taxpayer identification number,

“(2) the vehicle identification number of the vehicle, unless, in accordance with applicable rules promulgated by the Secretary of Transportation, the vehicle is not assigned such a number,

“(3) the battery capacity of the vehicle,

“(4) verification that original use of the vehicle commences with the taxpayer, and

“(5) the maximum credit under this section allowable to the taxpayer with respect to the vehicle.”.

“(a) Amount of credit.—For purposes of section 38, the clean hydrogen production credit for any taxable year is an amount equal to the product of—

“(1) the applicable amount, multiplied by

“(2) the kilograms of qualified clean hydrogen—

“(A) produced by the taxpayer at a qualified clean hydrogen production facility during the 10-year period beginning on the date the facility was placed in service, and

“(B) sold by the taxpayer to an unrelated person, or used by the taxpayer, during the taxable year.

“(b) Applicable amount.—

“(1) IN GENERAL.—For purposes of subsection (a)(1), the applicable amount shall be an amount equal to the applicable percentage of $3.00. If any amount as determined under the preceding sentence is not a multiple of 0.1 cent, such amount shall be rounded to the nearest multiple of 0.1 cent.

“(2) APPLICABLE PERCENTAGE.—For purposes of paragraph (1), the term ‘applicable percentage’ means—

“(A) in the case of any qualified clean hydrogen which is produced through a process that, as compared to hydrogen produced by steam-methane reforming, achieves a percentage reduction in lifecycle greenhouse gas emissions which is less than 75 percent, 20 percent,

“(B) in the case of any qualified clean hydrogen which is produced through a process that, as compared to hydrogen produced by steam-methane reforming, achieves a percentage reduction in lifecycle greenhouse gas emissions which is not less than 75 percent and less than 85 percent, 25 percent,

“(C) in the case of any qualified clean hydrogen which is produced through a process that, as compared to hydrogen produced by steam-methane reforming, achieves a percentage reduction in lifecycle greenhouse gas emissions which is not less than 85 percent and less than 95 percent, 34 percent, and

“(D) in the case of any qualified clean hydrogen which is produced through a process that, as compared to hydrogen produced by steam-methane reforming, achieves a percentage reduction in lifecycle greenhouse gas emissions which is not less than 95 percent, 100 percent.

“(3) INFLATION ADJUSTMENT.—The $3.00 amount in paragraph (1) shall be adjusted by multiplying such amount by the inflation adjustment factor (as determined under section 45(e)(2), determined by substituting ‘2020’ for ‘1992’ in subparagraph (B) thereof) for the calendar year in which the sale or use of the qualified clean hydrogen occurs. If any amount as increased under the preceding sentence is not a multiple of 0.1 cent, such amount shall be rounded to the nearest multiple of 0.1 cent.

“(c) Credit reduced for grants, tax-exempt bonds, subsidized energy financing, and other credits.—The amount of the credit determined under subsection (a) with respect to any qualified clean hydrogen production facility for any taxable year shall be reduced in a manner similar to the reduction applied under section 45(b)(3).

“(d) Definitions.—For purposes of this section—

“(1) LIFECYCLE GREENHOUSE GAS EMISSIONS.—For purposes of this section, the term ‘lifecycle greenhouse gas emissions’ has the same meaning given such term under subparagraph (H) of section 211(o)(1) of the Clean Air Act (42 U.S.C. 7545(o)(1)), as in effect on the date of enactment of this section.

“(2) QUALIFIED CLEAN HYDROGEN.—

“(A) IN GENERAL.—The term ‘qualified clean hydrogen’ means hydrogen which is produced through a process that, as compared to hydrogen produced by steam-methane reforming of non-renewable natural gas, achieves a percentage reduction in lifecycle greenhouse gas emissions which is not less than 50 percent.

“(B) EXCLUSION.—The term ‘qualified clean hydrogen’ shall not include any hydrogen for which a credit is allowed for the taxable year—

“(i) under section 38 which is properly allocable to any credit determined under this part (other than this section), or

“(ii) under subchapter B of chapter 65 of subtitle F.

“(3) QUALIFIED CLEAN HYDROGEN PRODUCTION FACILITY.—

“(A) IN GENERAL.—The term ‘qualified clean hydrogen production facility’ means—

“(i) a facility owned by the taxpayer—

“(I) which produces qualified clean hydrogen which, with respect to any taxable year, is sold by the taxpayer to an unrelated person or used by the taxpayer, and

“(II) which—

“(aa) subject to clause (ii) of subparagraph (B), satisfies the requirements under clause (i) of such subparagraph, and

“(bb) with respect to the construction of such facility, satisfies the requirements under section 501 of the Clean Energy for America Act, and

“(ii) in connection with any facility described in clause (i), any property used to convert feedstock to hydrogen, including any equipment or supporting facility which—

“(I) accepts or receives feedstock,

“(II) conditions or stores feedstock or hydrogen, or

“(III) distributes or redistributes hydrogen.

“(B) WAGE REQUIREMENTS.—

“(i) IN GENERAL.—The requirements described in this subparagraph with respect to any facility are that the taxpayer shall ensure that any laborers and mechanics employed by contractors and subcontractors in—

“(I) the construction of such facility, or

“(II) for any year described in subsection (a)(2)(A) for which the credit under this section is claimed, the alteration or repair of such facility,

shall be paid wages at rates not less than the prevailing rates for construction, alteration, or repair of a similar character in the locality as determined by the Secretary of Labor, in accordance with subchapter IV of chapter 31 of title 40, United States Code.

“(ii) FAILURE TO SATISFY WAGE REQUIREMENTS; CORRECTION AND PENALTY.—In the case of any taxpayer which fails to satisfy the requirement under clause (i) with respect to the construction of any facility or the alteration or repair of such facility in any year during the period described in clause (i)(II), rules similar to the rules of clauses (i) and (ii) of section 45U(b)(3)(B) shall apply for purposes of this subparagraph.

“(4) STEAM-METHANE REFORMING.—The term ‘steam-methane reforming’ means a hydrogen production process in which high-temperature steam is used to produce hydrogen from natural gas, without carbon capture and sequestration.

“(e) Special rules.—

“(1) IN GENERAL.—Rules similar to the rules of paragraphs (3) and (4) of section 45(e) shall apply for purposes of this section.

“(2) PRODUCTION IN THE UNITED STATES.—No credit shall be allowed under this section with respect to any qualified clean hydrogen which is produced outside of the United States (as defined in section 638(1) or any possession of the United States (as defined in section 638(2)).

“(f) Credit phase-Out.—

“(1) IN GENERAL.—If the Secretary and the Administrator of the Environmental Protection Agency determine that the greenhouse gas emissions from the transportation of persons and goods annually in the United States are equal to or less than 25 percent of the greenhouse gas emissions from the transportation of persons and goods in the United States during calendar year 2021, the amount of the clean hydrogen production credit under this section shall be determined by substituting the applicable amount (as determined under paragraph (2)(A)) for the dollar amount in subsection (b)(1).

“(2) APPLICABLE DOLLAR AMOUNT.—

“(A) IN GENERAL.—The applicable amount for any taxable year described in subparagraph (B) shall be an amount equal to the product of—

“(i) the dollar amount in paragraphs (1) of subsection (b) (as adjusted by paragraph (3) of such subsection), multiplied by

“(ii) the phase-out percentage under subparagraph (B).

“(B) PHASE-OUT PERCENTAGE.—The phase-out percentage under this subparagraph is equal to—

“(i) for any taxable year beginning in the first calendar year following the calendar year in which the determination described in paragraph (1) is made, 100 percent,

“(ii) for any taxable year beginning in the second calendar year following such determination year, 75 percent,

“(iii) for any taxable year beginning in the third calendar year following such determination year, 50 percent, and

“(iv) for any taxable year beginning in any calendar year subsequent to the year described in clause (iii), 0 percent.

“(g) Guidance.—Not later than 1 year after the date of enactment of this section, the Secretary, the Secretary of Energy, and Administrator of the Environmental Protection Agency shall publish guidance prescribing methods for determining the credit based on lifecycle greenhouse gas emissions.”.

“(a) Allowance of credit.—For purposes of section 38, in the case of an eligible contractor, the new energy efficient home credit for the taxable year is the applicable amount for each qualified residence which is—

“(1) constructed by the eligible contractor, and

“(2) acquired by a person from such eligible contractor for use as a residence during the taxable year.

“(b) Applicable amount.—

“(1) IN GENERAL.—For purposes of subsection (a), the applicable amount shall be an amount equal to—

“(A) in the case of a qualified residence described in subclause (I) of subsection (c)(3)(A)(iii), $2,500, and

“(B) in the case of a qualified residence described in subclause (II) of such subsection, $5,000.

“(2) ADJUSTMENT FOR INFLATION.—

“(A) IN GENERAL.—In the case of a taxable year beginning after 2022, the dollar amounts in paragraph (1) shall each be increased by an amount equal to—

“(i) such dollar amount, multiplied by

“(ii) the cost-of-living adjustment determined under section 1(f)(3) for the calendar year, determined by substituting ‘calendar year 2021’ for ‘calendar year 2016’ in subparagraph (A)(ii) thereof.

“(B) ROUNDING.—If any amount as increased under subparagraph (A) is not a multiple of $100, such amount shall be rounded to the nearest multiple of $100.

“(c) Definitions.—For purposes of this section:

“(1) CONSTRUCTION.—The term ‘construction’ does not include substantial reconstruction or rehabilitation.

“(2) ELIGIBLE CONTRACTOR.—The term ‘eligible contractor’ means—

“(A) the person who constructed the qualified residence, or

“(B) in the case of a qualified residence which is a manufactured home, the manufactured home producer of such residence.

“(3) QUALIFIED RESIDENCE.—

“(A) IN GENERAL.—The term ‘qualified residence’ means a dwelling unit—

“(i) located in the United States,

“(ii) the construction of which is substantially completed after the date of the enactment of this section,

“(iii) which is certified as satisfying the applicable national program requirements under—

“(I) the Energy Star Residential New Construction program (or any successor program, as determined by the Secretary), as in effect on January 1 of the year in which construction of the dwelling unit begins, or

“(II) the Zero Energy Ready Home program (or any successor program, as determined by the Secretary), as in effect on January 1 of the year in which construction of the dwelling unit begins, and

“(iv) in the case of a multifamily dwelling unit, subject to clause (ii) of subparagraph (B), which satisfies the requirements under clause (i) of such subparagraph.

“(B) WAGE REQUIREMENTS.—

“(i) IN GENERAL.—The requirements described in this clause with respect to any dwelling unit are that the eligible contractor shall ensure that any laborers and mechanics employed by such contractor and subcontractors in the construction of such dwelling unit shall be paid wages at rates not less than the prevailing rates for construction of a similar character in the locality as determined by the Secretary of Labor, in accordance with subchapter IV of chapter 31 of title 40, United States Code.

“(ii) CORRECTION AND PENALTY RELATED TO FAILURE TO SATISFY WAGE REQUIREMENTS.—In the case of any taxpayer which fails to satisfy the requirement under clause (i) with respect to any dwelling unit, rules similar to the rules of section 45U(b)(3)(B)(ii) shall apply for purposes of this subparagraph.

“(C) DENIAL OF DOUBLE BENEFIT.—The term ‘qualified residence’ does not include any dwelling unit for which a deduction determined under section 179D is allowed for the taxable year in which the dwelling unit is acquired as provided in subsection (a)(2).

“(d) Certification.—A certification described in this section shall be made—

“(1) by a third party which is accredited by a certification program approved by the Secretary and the Secretary of Energy, and

“(2) in accordance with—

“(A) any applicable rules under the national program requirements of the Energy Star Residential New Construction or Zero Energy Ready Home programs, as in effect on the date on which construction of the dwelling unit begins, and

“(B) guidance prescribed by the Secretary and the Secretary of Energy.

“(e) Basis adjustment.—For purposes of this subtitle, if a credit is allowed under this section in connection with any expenditure for any property (other than a qualified low-income building, as described in section 42(c)(2)), 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 determined.

“(f) Coordination with investment credits.—For purposes of this section, expenditures taken into account under section 25D or 47 shall not be taken into account under this section.”.

“(a) In general.—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 lesser of—

“(1) the sum of the applicable qualified property amounts for any qualified property placed in service by the individual during such taxable year, or

“(2) $1,500.

“(b) Applicable qualified property amount.—

“(1) IN GENERAL.—For any qualified property, the applicable qualified property amount shall be equal to the lesser of—

“(A) 30 percent of the amount paid or incurred by the individual for such qualified property (including any expenditures for labor costs properly allocable to the onsite preparation, assembly, or original installation of such property), or

“(B) $600.

“(2) ADJUSTMENT FOR INFLATION.—

“(A) IN GENERAL.—In the case of a taxable year beginning after 2022, each of the dollar amounts in paragraph (1)(B) (after application of subsection (c)(2)) and subsections (a)(2), (c)(2)(A), and (c)(2)(B)(i)(I) shall be increased by an amount equal to—

“(i) such dollar amount, multiplied by

“(ii) the cost-of-living adjustment determined under section 1(f)(3) for the calendar year, determined by substituting ‘calendar year 2021’ for ‘calendar year 2016’ in subparagraph (A)(ii) thereof.

“(B) ROUNDING.—If any amount as increased under subparagraph (A) is not a multiple of $10, such amount shall be rounded to the nearest multiple of $10.

“(c) Qualified property.—

“(1) IN GENERAL.—The term ‘qualified property’ means a furnace, boiler, condensing water heater, central air conditioning unit, heat pump, biomass property, or building envelope improvement which—

“(A) except as provided in subparagraph (B), meets or exceeds the requirements of—

“(i) the highest efficiency tier (not including any advanced tier) established by the Consortium for Energy Efficiency which are in effect at the time that the property is placed in service, or

“(ii) if no standard established by the Consortium for Energy Efficiency applies to such property, an equivalent standard as established by the Secretary and the Administrator of the Environmental Protection Agency,

“(B) in the case of a building envelope improvement—

“(i) except as provided in clause (ii) or (iii), meets or exceeds the latest applicable requirements of the Energy Star program (or any successor program, as determined by the Secretary), as in effect on January 1 of the year in which the property is placed in service,

“(ii) in the case of a window treatment, meets or exceeds the applicable certification requirements for such product under the Attachments Energy Rating Council certification program, or

“(iii) in the case of insulation described in subsection (d)(2)(A), meets the prescriptive criteria for such material or system established by the International Energy Conservation Code, as such Code (including supplements) is in effect on January 1 of the calendar year in which such material or system is installed,

“(C) is installed according to applicable Air Conditioning Contractors of America Quality Installation standards which are in effect at the time that the property was placed in service,

“(D) is for use in a dwelling unit which is located in the United States and used as a residence by the individual, and

“(E) is reasonably expected to remain in service in such dwelling unit for not less than 5 years.

“(2) SPECIAL RULES FOR CERTAIN HEAT PUMPS.—

“(A) AIR-SOURCE HEAT PUMPS.—In the case of any air-source heat pump which satisfies the requirements under paragraph (1), subsection (b)(1)(B) shall be applied by substituting ‘$800’ for ‘$600’.

“(B) GROUND SOURCE HEAT PUMP.—

“(i) IN GENERAL.—In the case of any qualified geothermal heat pump property which satisfies the requirements under subparagraphs (C) through (E) of paragraph (1)—

“(I) subsection (b)(1)(B) shall be applied by substituting ‘$10,000’ for ‘$600’, and

“(II) subsection (a)(2) shall be applied without regard to the applicable qualified property amount for such property.

“(ii) QUALIFIED GEOTHERMAL HEAT PUMP PROPERTY.—For purposes of this subparagraph, the term ‘qualified geothermal heat pump property’ means any equipment which—

“(I) uses the ground or ground water as a thermal energy source to heat a dwelling unit located in the United States and used as a residence by the taxpayer or as a thermal energy sink to cool such dwelling unit, and

“(II) meets the requirements of the Energy Star program which are in effect as of January 1 of the calendar year in which the expenditure for such equipment is made.

“(3) SPECIAL RULE FOR INSULATION.—In the case of any building envelope improvement described in subsection (d)(2)(A) which satisfies the applicable requirements under paragraph (1), subsection (b)(1) shall be applied without regard to ‘the lesser of’ and without regard to subparagraph (B).

“(d) Other definitions.—

“(1) BIOMASS PROPERTY.—

“(A) IN GENERAL.—For purposes of this section, the term ‘biomass property’ means any property which—

“(i) uses the burning of biomass fuel to heat a dwelling unit or to heat water for use in a dwelling unit, and

“(ii) using the higher heating value, has a thermal efficiency of not less than 75 percent.

“(B) BIOMASS FUEL.—For purposes of subparagraph (A), the term ‘biomass fuel’ means any plant-derived fuel which is available on a renewable or recurring basis, including any such fuel which has been subject to a densification process (such as wood pellets).

“(2) BUILDING ENVELOPE IMPROVEMENT.—For purposes of this section, the term ‘building envelope improvement’ means—

“(A) any insulation material or system, including air barrier insulation, which is specifically and primarily designed to reduce the heat loss or gain of a dwelling unit when installed in or on such dwelling unit, and

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

“(3) MANUFACTURED HOMES INCLUDED.—For purposes of this section, the term ‘dwelling unit’ includes a manufactured home which conforms to Federal Manufactured Home Construction and Safety Standards (part 3280 of title 24, Code of Federal Regulations).

“(e) Denial of double benefit.—No credit shall be allowed under subsection (a) for any amounts paid or incurred for which a deduction or credit is allowed under any other provision of this chapter.”.