UNITED STATES CODE
TITLE 26. INTERNAL REVENUE CODE  
SUBTITLE A. INCOME TAXES  
CHAPTER 1. NORMAL TAXES AND SURTAXES  
SUBCHAPTER A. DETERMINATION OF TAX LIABILITY  
PART IV. CREDITS AGAINST TAX  
SUBPART E. RULES FOR COMPUTING INVESTMENT CREDIT
26 USC § 48

§ 48.  Energy credit.

(a) Energy credit.
   (1) In general. For purposes of section 46, except as provided in paragraphs (1)(B) and (2)(B) of subsection (c), the energy credit for any taxable year is the energy percentage of the basis of each energy property placed in service during such taxable year.
   (2) Energy percentage.
      (A) In general. The energy percentage is--
         (i) 30 percent in the case of--
            (I) qualified fuel cell property,
            (II) energy property described in paragraph (3)(A)(i) but only with respect to periods ending before January 1, 2009, and
            (III) energy property described in paragraph (3)(A)(ii), and
         (ii) in the case of any energy property to which clause (i) does not apply, 10 percent.
      (B) Coordination with rehabilitation credit. The energy percentage shall not apply to that portion of the basis of any property which is attributable to qualified rehabilitation expenditures.
   (3) Energy property. For purposes of this subpart, the term "energy property" means any property--
      (A) which is--
         (i) equipment which uses solar energy to generate electricity, to heat or cool (or provide hot water for use in) a structure, or to provide solar process heat, excepting property used to generate energy for the purposes of heating a swimming pool,
         (ii) equipment which uses solar energy to illuminate the inside of a structure using fiber-optic distributed sunlight but only with respect to periods ending before January 1, 2009,
         (iii) equipment used to produce, distribute, or use energy derived from a geothermal deposit (within the meaning of section 613(e)(2)), but only, in the case of electricity generated by geothermal power, up to (but not including) the electrical transmission stage, or
         (iv) qualified fuel cell property or qualified microturbine property,
      (B) (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,
      (C) with respect to which depreciation (or amortization in lieu of depreciation) is allowable, and
      (D) which meets the performance and quality standards (if any) which--
         (i) have been prescribed by the Secretary by regulations (after consultation with the Secretary of Energy), and
         (ii) are in effect at the time of the acquisition of the property.
   The term "energy property" shall not include any property which is public utility property (as defined in section 46(f)(5) as in effect on the day before the date of the enactment of the Revenue Reconciliation Act of 1990 [enacted Nov. 5, 1990]). Such term shall not include any property which is part of a facility the production from which is allowed as a credit under section 45 for the taxable year or any prior taxable year.
   (4) Special rule for property financed by subsidized energy financing or industrial development bonds.
      (A) Reduction of basis. For purposes of applying the energy percentage to any property, if such property is financed in whole or in part by--
         (i) subsidized energy financing, or
         (ii) the proceeds of a private activity bond (within the meaning of section 141) the interest on which is exempt from tax under section 103,
      the amount taken into account as the basis of such property shall not exceed the amount which (but for this subparagraph) would be so taken into account multiplied by the fraction determined under subparagraph (B).
      (B) Determination of fraction. For purposes of subparagraph (A), the fraction determined under this subparagraph is 1 reduced by a fraction--
         (i) the numerator of which is that portion of the basis of the property which is allocable to such financing or proceeds, and
         (ii) the denominator of which is the basis of the property.
      (C) Subsidized energy financing. For purposes of subparagraph (A), the term 'subsidized energy financing' means financing provided under a Federal, State, or local program a principal purpose of which is to provide subsidized financing for projects designed to conserve or produce energy.

(b) 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 [enacted Nov. 5, 1990]) shall apply for purposes of subsection (a).

(c) Qualified fuel cell property; qualified microturbine property. For purposes of this section--
   (1) Qualified fuel cell property.
      (A) In general. The term "qualified fuel cell property" means a fuel cell power plant which--
         (i) has a nameplate capacity of at least 0.5 kilowatt of electricity using an electrochemical process, and
         (ii) has an electricity-only generation efficiency greater than 30 percent.
      (B) Limitation. In the case of qualified fuel cell property placed in service during the taxable year, the credit otherwise determined under subsection (a) for such year with respect to such property shall not exceed an amount equal to $ 500 for each 0.5 kilowatt of capacity of such property.
      (C) Fuel cell power plant. The term "fuel cell power plant" means an integrated system comprised of a fuel cell stack assembly and associated balance of plant components which converts a fuel into electricity using electrochemical means.
      (D) Special rule. The first sentence of the matter in subsection (a)(3) which follows subparagraph (D) thereof shall not apply to qualified fuel cell property which is used predominantly in the trade or business of the furnishing or sale of telephone service, telegraph service by means of domestic telegraph operations, or other telegraph services (other than international telegraph services).
      (E) Termination. The term "qualified fuel cell property" shall not include any property for any period after December 31, 2008.
   (2) Qualified microturbine property.
      (A) In general. The term "qualified microturbine property" means a stationary microturbine power plant which--
         (i) has a nameplate capacity of less than 2,000 kilowatts, and
         (ii) has an electricity-only generation efficiency of not less than 26 percent at International Standard Organization conditions.
      (B) Limitation. In the case of qualified microturbine property placed in service during the taxable year, the credit otherwise determined under subsection (a) for such year with respect to such property shall not exceed an amount equal $ 200 for each kilowatt of capacity of such property.
      (C) Stationary microturbine power plant. The term "stationary microturbine power plant" means an integrated system comprised of a gas turbine engine, a combustor, a recuperator or regenerator, a generator or alternator, and associated balance of plant components which converts a fuel into electricity and thermal energy. Such term also includes all secondary components located between the existing infrastructure for fuel delivery and the existing infrastructure for power distribution, including equipment and controls for meeting relevant power standards, such as voltage, frequency, and power factors.
      (D) Special rule. The first sentence of the matter in subsection (a)(3) which follows subparagraph (D) thereof shall not apply to qualified microturbine property which is used predominantly in the trade or business of the furnishing or sale of telephone service, telegraph service by means of domestic telegraph operations, or other telegraph services (other than international telegraph services).
      (E) Termination. The term "qualified microturbine property" shall not include any property for any period after December 31, 2008.