Tax Credit for
Energy-Efficient Building Equipment
Present Law: No income tax credit is
currently provided for investment in energy-efficient building equipment.
Proposed Law: An income tax credit of
either 10 or 20 percent would be available for the purchase of certain types of highly energy-efficient
building equipment.
This would be a
non-refundable tax credit and subject to the dollar caps as stated below.
If a business claimed this credit, it
would be subject to the general business credit provisions (see Appendix 2) and the basis of the equipment claimed would be
reduced.
10-percent
credit
The following building
equipment would be eligible for a credit of 10 percent of the their purchase
price up to a maximum of $250 per unit:-
Electric heat pumps, central air conditioners and advanced natural gas
water heaters. Note that these various types of equipment have to meet certain
specifications to qualify for the credit.
20-percent
credit
The following building equipment would be
eligible for a credit of 20 percent of their purchase price:
·
Fuel
cells – maximum credit would be $500 per kilowatt of capacity
·
Electric
heat pump hot water heaters – maximum credit would be $500 per unit
·
Electric
heat pumps – maximum credit would be $500 per unit
·
Central
air conditioners – maximum credit would be $500 per unit
·
Advanced
natural gas water heaters – maximum credit would be $500 per unit
·
Natural
gas heat pumps – maximum credit would be $1,000 per unit.
Note that as above these
various types of equipment have to meet certain specifications to qualify for
the credit.
Tax Credit for the Purchase of Energy-Efficient New Homes
Present Law: No income tax credit is
currently provided for the purchase of energy-efficient new homes.
Proposed Law: A taxpayer may claim the
credit only on a new house which is the taxpayer’s principal residence and
energy usage within the new home is reduced by prescribed amounts as compared
to the IECC standards for single family residences. The available tax credits
are as follows:
·
$1,000
for new homes that are at least 30 percent more efficient,
·
$1,500
for new homes that are at least 40 percent more efficient, and
·
$2,000
for new homes that are at least 50 percent more efficient than the IECC
standards.
Extend Tax Credit for High Fuel-Economy Vehicles
Present Law: A 10-percent tax credit is
provided for the cost of a qualified electric vehicle, up to a maximum credit
of $4,000 pursuant to I.R.C. § 30.
Proposed Law:
The
present credit would be extended for qualified electric vehicles and a
temporary tax credit for fuel-efficient hybrid vehicles would be provided:
·
Credit
for electric vehicles – the phase down as provided for in I.R.C. § 30(b)(2)
would be eliminated and the credit would be extended through 2006. However, the
maximum credit would still remain at $4,000.
·
Credit
for fuel-efficient hybrid vehicles (see
Appendix 3):
·
$1,000
for each vehicle that is one-third more fuel efficient than a comparable
vehicle in its class,
·
$2,000
for each vehicle that is two-thirds more fuel efficient than a comparable
vehicle in its class,
·
$3,000
for each vehicle that is twice as fuel efficient than a comparable vehicle in
its class, and
·
$4,000
for each vehicle that is three times as fuel efficient than a comparable
vehicle in its class.
These credits would be
available for all qualifying light vehicles e.g. cars, minivans, etc. Taxpayers
would not be able to claim both of the above credits for the same vehicle.
Tax Credit for Combined Heat and Power (“CHP”) Systems
Present Law: No income tax credit is
currently provided for investments in CHP systems.
Proposed Law:
The
taxpayer would be entitled to an 8-percent investment credit for qualified CHP
(see Appendix 3) systems with an
electrical capacity in excess of 50 kilowatts or with a capacity to produce
mechanical power in excess of 67 horsepower. To qualify as a CHP system
eligible for this credit various other technical specifications and performance
standards have to be met, relating to energy efficiency standards for example.
The credit would be treated as part of the
investment component (I.R.C. § 46) of the general business credit (I.R.C. § 38)
and would be subject to the rules and limitations governing such property.
Only property placed in
service in the United States would be eligible for the credit. The basis of the
qualified CHP property would be reduced by the amount of the credit. Taxpayers
claiming the CHP credit would not be entitled to claim any other credit on the
same property.
Tax Credit for Rooftop Solar Equipment
Present Law: A nonrefundable business
energy tax credit is allowed for 10 percent of the cost of qualified solar and
geothermal energy property. (I.R.C. § 48(a)). The energy tax credit is a
component of the general business credit (I.R.C. § 38) and is thus subject to
the general business credit provisions.
Proposed Law: A tax credit would be
available equal to 15 percent of the qualified investment up to a maximum of:
·
$1,000
for solar water heating systems., and
·
$2,000
for rooftop photovoltaic systems (see
Appendix 3).
These systems cannot be used to heat swimming pools
to be eligible for the credit. The
credit is nonrefundable. For businesses, it is a component of the general
business credit. The basis of eligible property is reduced by the amount of
credit refunded. Taxpayers would have to choose between the proposed
credit and the present energy credit
for each investment.
Extend Wind and
Biomass Tax Credit
Present Law: Pursuant to I.R.C. § 45, an
income tax credit is allowed equal to 1.7 cents (1.5 cents plus adjustments for
inflation since 1992) per kilowatt hour of electricity produced from either
qualified wind energy or qualified “closed-loop” biomass (see Appendix 3) facilities during the 10-year period after the
facility was placed in service. This credit does not apply to facilities that
utilize waste materials e.g. manure, municipal waste, etc. or standing timber
to produce electricity. To qualify for the credit the taxpayer must own the
facility and sell the electricity produced to an related party.
This
credit is a component of the general business credit and subject to the
provisions and limitations applicable to the general business credit.
Proposed Law: The current credit would be
extended for 5 years, to facilities placed in service before July 1, 2004. The
definition of qualifying biomass sources would be expanded to include various
solid, nonhazardous, cellulosic waste materials (Unsegregated municipal solid
waste would not qualify for the credit). Biomass that would be co-fired in coal
plants would be eligible for the credit at 1.0 cent per kilowatt hour through
June 30, 2004.
Reference Sources:
Joint Committee on Taxation,
Description of Revenue Provisions Contained in the President’s Fiscal Year 2000
Budget Proposal (JCS-1-99), February 22, 1999.
