Energy Policy Act of 2005 Tax Credits

Congress recently passed the Energy Policy Act of 2005, which offers consumer and builder tax incentives for increasing the energy efficiency of new and existing homes through measures such as added insulation; energy-efficient windows, doors and roofs; and energy-efficient heating and cooling equipment. Incentives include the purchase and installation of energy-efficient appliances and products, renewable energy measures, construction of highly energy-efficient homes, and the purchase of certain fuel-efficient vehicles. Most of these tax credits remain in effect through 2007.

Tax Incentive Coalition Launches Website to Help Consumers, Businesses
Save with New Energy Efficiency Tax Credits
November 2005
The Tax Incentives Assistance Project (TIAP) provides information to give consumers and businesses information they need to make use of the federal income tax incentives for energy efficient projects and technologies passed by Congress as part of the Energy Policy Act of 2005. The Tax Incentives Assistance Project (TIAP) is sponsored by a coalition of public interest nonprofit groups, government agencies, and other organizations in the energy efficiency field. TIAP will update the web site regularly as the IRS makes new information available.

Energy Policy Act of 2005 Tax Credits
A synopsis of the Energy Policy Act of 2005 Tax Credits can be seen at the bottom of this page.

The U. S. Environmental Protection Agency (EPA) has created a set of tax credit fact sheets for use by state and territory energy offices.  These fact sheets were created with substantial input from members of the National Association of State Energy Official's Energy Star Task Force. 

Consumer Tax Credits
Consumer Tax Credits for Energy Efficiency.

Residential Tax Credits
Using Home Performance with Energy Star to Take Advantage of Tax Credits for Residential Energy Efficiency.

Commercial Tax Incentives
Are You Ready to Take Advantage of the New Commercial Tax Incentives?

Treasury/IRS Provide Guidance for Energy Credits for Homeowners February 2006
The U. S. Treasury Department and the IRS have issued Notice 2006-26, which guides homeowners in claiming credits for purchases that make their homes more efficient.

Treasury/IRS Provide Guidance for Energy Credits to Home Builders
February 2006
Guidance regarding the energy-efficient homes credit available under the Energy Policy Act of 2005. Under the new provision, an eligible contractor who constructs a qualified new energy-efficient home may qualify for a credit of up to $2,000. The credit is available for all new homes, including manufactured homes constructed in accordance with the Federal Manufactured Homes Construction and Safety Standards.

The Energy Bill: New Energy-Efficiency Home and Vehicle Tax Credits
This site is a partnership of the Alliance to Save Energy and the U.S. Department of Energy. It examines tax credits and vehicle, home improvement and solar credits available under the Energy Policy Act. Also see this pdf file.

New Energy Efficiency Tax Credits Take Effect January 2006
A DOE web site, which lists some of the specific provisions of the new Energy Policy Act of 2005.

Energy Bill Extends Wind Power Incentive through 2007
First-ever "Seamless" Extension Will Spur Investment, Job Creation, and Clean Energy Production.

SEIA Guide to Federal Tax Credits for Solar Energy
To help homeowners take advantage of the federal solar energy tax credits, the Solar Energy Industries Association (SEIA) has published "The SEIA Guide to Federal Tax Credits for Solar Energy," a 40-page manual in the form of a 1.4-MB PDF file. See the SEIA press release and sign up on the SEIA Web site to receive a free copy of the guide via email.

IRS Provides Guidance on Tax Credits for Efficient Vehicles January 2006
IRS/Treasury provide guidance to hybrid manufacturers.

Schools and the Energy Policy Act of 2005 February 2006
An Alliance to Save Energy article.

New Bill May Extend Energy Policy Act Tax Credits through 2010 March 2006
The creation of sustainable markets for energy-efficient homes and commercial buildings got a boost today with the introduction of a Senate bill to extend new federal tax credits authorized in the Energy Policy Act of 2005 through 2010, the Alliance to Save Energy said today.

IRS Releases Tax Credit Figures for Ford and Toyota Hybrids April 2006
The U.S. Internal Revenue Service (IRS) announced last week the official dollar amounts for federal tax credits earned with the purchase of Toyota and Ford hybrid vehicles. Anyone who purchased a new 2005 or 2006 Toyota Prius since January 1st may receive a credit of $3,150 on this year's taxes, while smaller credits can be earned by buying the Toyota Highlander Hybrid or the Lexus RX400h. For Ford, the 2006 Escape Hybrid with front wheel drive earns the largest credit, at $2,600, while the four-wheel-drive Escape Hybrid and Mercury Mariner Hybrid earn a credit of only $1,950. The agency has not announced the tax credit figures for Honda, but since the earlier estimates by the American Council for an Energy Efficient Economy (ACEEE) proved accurate for Ford and Toyota, those estimates are probably a reliable guide for Honda. After each automaker sells 60,000 hybrid vehicles, the tax credits will begin to phase out. See the IRS press releases on the Ford and Toyota hybrids. For Honda, see the ACEEE estimates.

High-Efficiency Lighting Tax Benefits
This free National Lighting Bureau brochure explains the tax benefits available For High-Efficiency Lighting as authorized by the Energy Policy Act of 2005 and offers sources of additional information.

Synopsis

Biodiesel/Alternative Fuels

Small producer biodiesel and ethanol credit. This credit will benefit small agri-biodiesel producers by giving them a 10 cent per gallon tax credit for up to 15 million gallons of agri-biodiesel produced. In addition, the limit on production capacity for small ethanol producers increased from 30 million to 60 million gallons. This is effective until the end of 2008.

Credit for installing alternative fuel refueling property. Fueling stations are eligible to claim a 30% credit for the cost of installing clean-fuel vehicle refueling equipment, (e.g. E85 ethanol pumping stations). Under the provision, a clean fuel is any fuel that consists of at least 85% ethanol, natural gas, compressed natural gas, liquefied natural gas, liquefied petroleum gas, or hydrogen and any mixture of diesel fuel and biodiesel containing at least 20% biodiesel. This is effective through December 31, 2010.

Buildings

Credit for business installation of qualified fuel cells, stationary microturbine power plants, and solar equipment. This provides a 30% tax credit for the purchase price for installing qualified fuel cell power plants for businesses, a 10% credit for qualifying stationary microturbine power plants and a 30% credit for qualifying solar energy equipment. This is effective January 1, 2006 through December 31, 2007.

Business credit of energy-efficient new homes. This provides tax credits to eligible contractors for the construction of a qualified new energy-efficient home. Credit applies to manufactured homes meeting Energy Star criteria and other homes, saving 50% of the energy compared to the EPACT standard. This is effective January 1, 2006 through December 31, 2007.

Energy-efficient Commercial building deduction. This provision allows a tax deduction for energy-efficient commercial buildings that reduce annual energy and power consumption by 50% compared to the American Society of Heating, Refrigerating, and Air Conditioning Engineers (ASHRAE) 2001 standard. The deduction would equal the cost of energy-efficient property installed during construction, with a maximum deduction of $1.80 per square foot of the building. Additionally, a partial deduction of 60 cents per square foot would be provided for building subsystems.

Energy-efficient appliances - This provides a tax credit for the manufacturer of energy-efficient dishwashers, clothes washers, and refrigerators. Credits vary depending on the efficiency of the unit. This is effective for appliances manufactured in 2006 and 2007.

Below is a table of anticipated tax savings and energy savings for energy-efficient home improvements (as of November 2005):

Product Category

Product Type

Tax Credit Specification

Tax Credit

Windows

Exterior Windows

Meet 2000 IECC & Amendments

10% of cost not to exceed $200 total

Skylights

Meet 2000 IECC & Amendments

10% of cost not to exceed $200 total

Exterior Doors

Meet 2000 IECC & Amendments

10% of cost not to exceed $500 total

Roofing

Metal Roofs

Energy Star qualified

10% of cost not to exceed $500 total

Insulation

Insulation

Meet 2000 IECC & Amendments

10% of cost not to exceed $500 total

HVAC

Central AC

EER 12.5/SEER 15 split Systems EER 12/SEER 14 package systems

$300

Air source heat pumps

HSPF 9 EER 13 SEER 15

$300

Geothermal heat pump

EER 14.1 COP 3.3 closed loop

EER 16.2 COP 3.6 open loop

EER 15 COP 3.5 direct expansion

$300

Gas, oil, propane water heater

Energy Factor 0.80

$300

Electric heat pump water heater

Energy Factor 2.0

$300

Gas, oil, propane furnace or hot water boiler

AFUE 95

$150

Advanced main air circulating fan

No more than 2% of furnace total energy use

$50

*Source: www.EnergyStar.gov

**The IRS will determine final tax credit amounts. As more information becomes available, it can be found at: http://www.energy.gov.


The Energy Policy Act of 2005 included a new tax incentive, backed and advocated by the National Electrical Manufacturers Association (NEMA) and the Natural Resources Defense Council (NRDC), to improve the energy efficiency of commercial buildings. The "Commercial Building Tax Deduction" establishes a tax deduction for expenses incurred for energy efficient building expenditures made by a building owner. The deduction is limited to $1.80 per square foot of the property, with allowances for partial deductions for improvements in interior lighting, HVAC and hot water systems, and building envelope systems. The provision is effective for property placed in service from January 1, 2006 through December 31, 2007. 


The IRS has not issued final rules for this provision. Once they are issued, they will be posted on this site. Please check back for relevant updates.

Internal Revenue Bulletin 2006-26, June 26, 2006 (CBTD begins on page 1175 of the IRB) - Formal notice of the June 2 guidance (corrects error of the lighting sliding scale provision).

      NEMA comments on IRS Notice 2006-52

On June 2, 2006, U.S. Treasury issued initial guidance and procedures for the Commercial Buildings Deduction:
IRS Unveils Procedure Enabling Commercial Property Owners to Qualify for Energy Efficiency Deduction

Major Rules:

H.R. 6 Conference Report ( 1.49 mb)

Conservation and Energy Efficiency Provisions, SEC. 1331 ( 56 kb)

DOE Regulations on Product Efficiency Implementing Energy Policy Act of 2005 ( 108 kb)

 

Related Links:

NEW DOE is maintaining a list of the Qualified Computer Software for Calculating Energy Savings for Purposes of the Energy-Efficient Commercial Building Tax Deduction under Internal Revenue Code §179D. Go to the following link:

http://www.eere.energy.gov/buildings/info/qualified_software/

Summary of the $14.5 Billion tax title in HR 6 ( 456 kb)

Efficiency and Demand Response Programs ( )  - a list of electric company programs for 2005/2006. List compiled by EEI.

The New Energy Bill: Tax Deductions for Energy Efficient Construction and Renovation (PowerPoint 160 kb) - BOMA Webinar, December 7, 2005

Comments for regulations on implementing the Commercial Buildings Tax Deduction:
Tax Incentives Assistance Project (TIAP) Commercial Building Tax Deduction (CBTD) Position Paper
Coalition Comments on and Exceptions to TIAP CBTD Recommendations

The Energy Policy Act 2005 - Philips Energy-Efficient Product Portfolio ( 491 kb)

Federal Tax Benefits for Energy Efficient Construction and Renovation (PowerPoint 6.95 mb) - BOMA Boise; April 20, 2006

 

Related Events:

The Association of Energy Engineers (AEE): Calendar of Events related to the Energy Policy Act of 2005 ( 27 kb)

EPAct: Status of Rule Making Process and Appropriations

  • Washington, D.C. / September 14, 2006 / 2:30 –4:30 pm
  • Washington Convention Center

EPAct: Building Codes & Tax Incentives for Commercial Buildings

  • Washington, D.C. / September 14, 2006 / 2:30-4:30 pm
  • Washington Convention Center

 

Useful Websites:

Commercial Lighting Tax Deduction

U.S. Senate

U.S. House of Representatives

 



 

 

 

 

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