TAX CREDIT OPPORTUNITIES FOR
SOLAR AND ENERGY EFFICIENCY
Source: Florida Solar Energy Center
http://www.fsec.ucf.edu/en/news/press/enews/2005/2005-03_EPAct2005.htm
The Energy Policy Act of 2005 ( EPAct 2005) is the first effort of the United States government to address U.S. energy policy since the Energy Policy Act of 1992. Among many other things, the 1724 page law provides new tax incentives for a number of solar and energy efficiency measures. Among them are:
Solar Photovoltaic and Hot Water Systems
This provision offers tax credits to individuals for residential solar energy systems.
- For solar hot water systems, the allowable tax credit is 30% of the qualified solar system expenditures up to a maximum tax credit limitation of $2,000.
- For solar photovoltaic (PV) systems, the allowable tax credit is 30% of the qualified PV system expenditures up to a maximum tax credit limitation of $2,000.
The incentives apply to equipment placed in service during 2006-2007.
In addition , the provisions of the bill substantially increases the business investment tax credit from 10% to 30%. This tax credit is available to businesses that purchase solar thermal and PV systems during calendar years 2006 and 2007. This business investment tax credit for solar equipment does not have a maximum credit limit.
Commercial Buildings
This provision offers business taxpayers a deduction of $1.80 per square foot for commercial buildings that achieve a 50% reduction in annual energy cost to the user, compared to a base building defined by the industry standard ASHRAE/IESNA 90.1-2001. Energy costs refer only to heating, cooling, lighting and water heating, since only these uses are within the scope of the ASHRAE standard and within the control of the building designer.
Each of the three energy-using systems of the building — the envelope, the heating, cooling and water heating system, and lighting system — is eligible for one third of the incentive if it meets its share of the whole-building savings goal. Explicit interim compliance procedures are provided for lighting.
The incentives apply to buildings or systems placed in service during 2006-2007, although extenders increasing the eligibility through 2009 or 2010 are a distinct possibility.
New Homes
This provision offers homebuilders a tax credit of $2,000 for homes that reduce energy use for heating and cooling only (not hot water) by 50% compared to the national model code — the 2004 IECC Supplement (assuming an SEER-13 air conditioner). Producers of manufactured homes can also choose to qualify for a tax credit of $1,000 for homes that save 30%. This $1,000 credit for reaching 30% savings is not available for site-built homes, which must reach the 50% savings tier to qualify for the $2,000 credit.
The incentives apply to homes placed in service during 2006-2007, although extenders increasing the eligibility through 2009 are a possibility.
Existing Homes
These provisions offer cost-based incentives of 10% of the amount expended by the taxpayer for "Qualified Energy Efficiency Improvements" and up to $300 for "Qualified Energy Property" up to a maximum credit limit of $500.
"Qualified Energy Efficiency Improvements" are specifically defined as:
- Any insulation material or system specifically designed to reduce heat loss or gain
- Exterior windows (including skylights)
- Exterior doors
- Any metal roof having pigmented coatings specifically designed to reduce heat gain which meet Energy Star program requirements.
"Qualified Energy Property" is defined as:
- Electric heat pump water heater with EF of 2.0 or greater
- Electric air source heat pumps with HSPF of 9.0 or greater
- Geothermal heat pumps:
- Closed loop products with EER of 16.2 and COP of 3.3 or greater
- Open loop products with EER of 14.1 and COP of 3.3 or greater
- Direct expansion (DX) products with EER of 15 and COP of 3.5 or greater
- Central air conditioner that receives the highest efficiency tier established by the Consortium of Energy Efficiency as of January 1, 2006
- Natural gas, propane or oil water heater with EF or 0.80 or greater
- Natural gas, propane or oil furnace or hot water boiler with AFUE of 95% or greater
- Advanced main air circulating fan used in natural gas, propane or oil furnace that uses no more than 2% of the total annual energy use of the furnace.
Credit limitations on qualified energy property are as follows:
- $50 for any advanced main air circulating fan
- $150 for any qualified natural gas, propane, or oil furnace or hot water boiler
- $300 for any item of qualified energy property.
The incentives apply to improvements and equipment placed in service during 2006-2007.
Residential Fuel Cells
This provision offers cost-based 30% tax credits to individuals for qualified residential fuel cell property expenditures up to a maximum credit limitation of $500 for each 500 watts installed capacity.
The incentives apply to equipment placed in service during 2006-2007.
IRS rules for qualification of this tax credit may be found in IRS Notice 2006-26 .
Fuel Cells and Microturbines Used in a Business
This provision offers tax credits for fuel cells and microturbines used in a business. To qualify for the credit, fuel cells are required to be 500 watt capacity or greater with a generation efficiency of 30% or greater. Microturbines are required to be of 2,000 kilowatt capacity or less with an efficiency of 26% at International Standards Organization conditions. Tax credits and limitations are as follows:
- For fuel cells, a tax credit of 30% of the expenditure up to a maximum of $500 per 500 watts of capacity.
- For microturbines , a tax credit of 10% of the expenditure with a credit limitation of $200/kW.
The incentives apply to equipment placed in service during 2006-2007.
|
