Par. 2. Sections 1.25C-0 through 1.25C-4 are added to read as follows:
(a) In general. With respect to property placed in service after December 31, 2022, and subject to the requirements and limitations set forth in section 25C of the Internal Revenue Code (Code) as implemented by the section 25C regulations (as defined in paragraph (b)(24) of this section), section 25C of the Code allows as a credit against the tax imposed by chapter 1 of the Code for the taxable year 30 percent of certain amounts paid or incurred by an individual taxpayer (taxpayer) during such taxable year for qualified energy efficiency improvements (as defined in paragraph (b)(16) of this section) installed during such taxable year, residential energy property expenditures (as defined in paragraph (b)(20) of this section) (together, section 25C property), and home energy audits (as defined in paragraph (b)(10) of this section). Paragraph (b) of this section provides definitions that apply for purposes of the section 25C credit and the section 25C regulations. Section 1.25C-2 provides general rules and limitations regarding the section 25C credit. Section 1.25C-3 provides special rules regarding the section 25C credit. Section 1.25C-4 provides rules regarding the qualified product identification number (PIN) requirements under section 25C(h) for specified property placed in service after December 31, 2024, and other requirements that manufacturers must satisfy in order for their products to become eligible for the section 25C credit.
(b) Definitions. The definitions in this paragraph (b) solely apply for purposes of section 25C of the Code and the section 25C regulations.
(1) Building envelope component. The term building envelope component means:
(i) Any insulation material or system, including air sealing material or system that is specifically and primarily designed to reduce the heat loss or gain of a dwelling unit when installed in or on such dwelling unit;
(ii) Exterior windows, including skylights; and
(iii) Exterior doors.
(2) Code. The term Code means the Internal Revenue Code.
(3) Consortium for Energy Efficiency (CEE). The term Consortium for Energy Efficiency or CEE refers to the nonprofit consortium, consisting primarily of utility efficiency program administrators across the United States and Canada, that determines energy performance specification Tiers for HVAC and water heating equipment, including the geographic region where each specification is applicable.
(4) Dwelling unit. The term dwelling unit includes:
(i) A house, apartment, condominium unit owned by a taxpayer who is a member of a condominium management association with respect to such unit, mobile home, houseboat, or similar property used to provide living accommodations in a building or structure, but not structures or other property appurtenant to such dwelling unit and not that portion of a unit that is used on a transient basis or exclusively as a hotel, motel, inn, or similar establishment,
(ii) A manufactured home that conforms to the Federal Manufactured Home Construction and Safety Standards (24 CFR part 3280), and
(iii) Any property designated as a dwelling unit in guidance.
(5) Enabled property. The term enabled property means:
(i) Qualified energy efficiency improvements described in section 25C(c)(1) through (4), or
(ii) Qualified energy property described in section 25C(d)(2)(A) through (C) for which a section 25C credit is allowed for expenditures with respect to such property, and
(iii) For which an enabling property (as defined in paragraph (b)(6) of this section) enables the installation and use.
(6) Enabling property. The term enabling property means property described in section 25C(d)(2)(D) that is any improvement to, or replacement of, a panelboard, sub-panelboard, branch circuits, or feeders that:
(i) Is installed in a manner consistent with the National Electric Code,
(ii) Has a load capacity of not less than 200 amps,
(iii) Is installed in conjunction with any qualified energy efficiency improvements described in section 25C(c)(1) through (4), or any qualified energy property described in section 25C(d)(2)(A) through (C) for which a section 25C credit is allowed for expenditures with respect to such property, and
(iv) Enables the installation and use of any enabled property, as defined in paragraph (b)(5) of this section.
(7) Energy efficient building envelope component. The term energy efficient building envelope component means a building envelope component, as defined in section 25C(c)(3), that meets:
(i) In the case of an exterior window or skylight, Energy Star certified most efficient certification requirements;
(ii) In the case of an exterior door, applicable Energy Star certified requirements; and
(iii) In the case of any other building envelope component, the prescriptive criteria for such component established by the most recent International Energy Conservation Code standard in effect as of the beginning of the calendar year (as determined by the U.S. Secretary of Energy) that is 2 years prior to the calendar year in which such component is placed in service.
(8) Energy Star. The term Energy Star refers to the voluntary labeling and rating program administered by the U.S. Environmental Protection Agency that determines the applicable climate zones for exterior windows, skylights, and doors.
(9) Guidance. The term guidance means guidance published in the Internal Revenue Bulletin. See § 601.601 of this chapter.
(10) Home energy audit. The term home energy audit means an inspection and written report with respect to a dwelling unit located in the United States and owned or used by the taxpayer as the taxpayer's principal residence (within the meaning of section 121 of the Code) that:
(i) Identifies the most significant and cost-effective energy efficiency improvements with respect to such dwelling unit, including an estimate of the energy and cost savings with respect to each such improvement, and
(ii) Is conducted and prepared by a home energy auditor that meets the certification or other requirements specified in the section 25C regulations or guidance.
(11) International Energy Conservation Code standard. The term International Energy Conservation Code standard refers to the model building codes developed by the International Code Council that sets minimum conservation requirements for new buildings in the United States.
(12) IRS. The term IRS means the Internal Revenue Service.
(13) Originally placed in service; Original use. The term originally placed in service refers to the first time the property is placed in service, whether or not by the taxpayer. The term original use refers to the first use to which the property is put or will be put, whether or not that use corresponds or will correspond to the use of the property by the taxpayer.
(14) Paid or incurred. The term paid or incurred has the same meaning as provided in section 7701(a)(25) of the Code.
(15) Placed in service. The term placed in service refers to the date on which property that is eligible for the section 25C credit is placed in a condition or state of readiness and availability for its specifically assigned function.
(16) Qualified energy efficiency improvements. The term qualified energy efficiency improvements means any energy efficient building envelope component, if:
(i) Such component is installed in or on a dwelling unit located in the United States and owned and used by the taxpayer as the taxpayer's principal residence (within the meaning of section 121);
(ii) The original use of such component commences with the taxpayer; and
(iii) Such component reasonably can be expected to remain in use for at least 5 years.
(17) Qualified energy property. The term qualified energy property means any of the following:
(i) Any of the following that meet or exceed the highest efficiency tier (not including any advanced tier) established by the Consortium for Energy Efficiency (CEE) that is in effect as of the beginning of the calendar year in which the property is placed in service:
(A) An electric or natural gas heat pump water heater;
(B) An electric or natural gas heat pump;
(C) A central air conditioner;
(D) A natural gas, propane, or oil water heater;
(E) A natural gas, propane, or oil furnace or hot water boiler;
(ii) A biomass stove or boiler that:
(A) Uses the burning of biomass fuel to heat a dwelling unit located in the United States and used as a residence by the taxpayer, or to heat water for use in such a dwelling unit, and
(B) Has a thermal efficiency rating of at least 75 percent (measured by the higher heating value of the fuel, as determined by the U.S. Environmental Protection Agency for wood stoves).
(iii) Any oil furnace or hot water boiler that is placed in service after December 31, 2022, and before January 1, 2027, and:
(A) Meets or exceeds 2021 Energy Star certified efficiency criteria, and
(B) Is rated by the manufacturer for use with fuel blends at least 20 percent of the volume of which consists of an eligible fuel, as defined in section 25C(d)(3).
(iv) Any oil furnace or hot water boiler that is placed in service after December 31, 2026, and:
(A) Achieves an annual fuel utilization efficiency rate of not less than 90, and
(B) Is rated by the manufacturer for use with fuel blends at least 50 percent of the volume of which consists of an eligible fuel, as defined in section 25C(d)(3).
(v) Any enabling property.
(18) Qualified manufacturer. The term qualified manufacturer means any manufacturer of specified property that has entered into an agreement with the IRS as described in section 25C(h)(3) and § 1.25C-4.
(19) Qualified product identification number (PIN). The term qualified product identification number or PIN means, with respect to any item of specified property, the product identification number assigned to such item by the qualified manufacturer pursuant to the methodology referred to in section 25C(h)(3) and described in § 1.25C-4.
(20) Residential energy property expenditures. The term residential energy property expenditures means expenditures, including expenditures for labor costs properly allocable to the onsite preparation, assembly, or original installation of the property, made by the taxpayer for qualified energy property that is:
(i) Installed on or in connection with a dwelling unit located in the United States and used as a residence by the taxpayer; and
(ii) Originally placed in service by the taxpayer.
(21) Secretary. The term Secretary means the Secretary of the Treasury or her delegate.
(22) Section 25C credit. The term section 25C credit means the credit allowable to a taxpayer for the taxable year under section 25C(a) and the section 25C regulations.
(23) Section 25C property. The term section 25C property means qualified energy efficiency improvements as defined under section 25C(c) and residential energy property expenditures as defined under section 25C(d).
(24) Section 25C regulations. The term section 25C regulations means §§ 1.25C-1 through 1.25C-4.
(25) Specified property. The term specified property means qualified energy property described in section 25C(d)(2) and paragraph (b)(17) of this section, and exterior windows (including skylights) and exterior doors described in section 25C(c)(3)(B) and (C). Any property placed in service outside of the United States is not specified property.
(c) Applicability date. This section applies to taxable years ending after [DATE OF PUBLICATION OF FINAL REGULATIONS IN THE FEDERAL REGISTER ].