A bill to amend the Internal Revenue Code of 1954 to provide tax incentives for the refurbishing and refitting of existing small hydroelectric generating facilities.

Amends the Internal Revenue Code to qualify small hydroelectric property, including fish passageways, for the investment tax credit against income tax. Makes such property eligible for a 20 percent credit in addition to the existing ten percent credit. Extends the period of qualification through December 31, 1985.

Exempts small hydroelectric property from the public utility property depreciation deduction rules, at the taxpayer's election. Reduces the asset depreciation life of such property from 40-60 years to ten years for buildings and five years for equipment. Increases from one-and-a-half percent to four percent the annual asset guideline repair allowance percentage. Allows a 100 percent investment credit for any such property with a useful life of five years or more.

Excludes from gross income the interest on State and local bonds funding small hydroelectric power generating projects.