# Presentation: 082532

## Energy Tax and Rebate Incentives

- Rob Vieira
- Director, Buildings Research
- Presented by Muthusamy Swami
- DOE Codes and Standards Workshop
- Denver CO. August 2, 2006

## Tax Credits and Deductions

- $1000 as a
- Credit = $1000
- Deduction = $1000 x tax rate
- assume 28% tax rate=>   $1000 x 0.28 = $280

## Federal Commercial Tax Credit - Status

**Notice 2006-52**
- This notice sets forth **interim guidance**, pending the issuance of regulations, relating to the deduction for energy efficient commercial buildings under § 179D of the Internal Revenue Code.

## Federal Commercial Tax Credit – Time Frame

- Sections 179D(d)(1) and 179D(f) allow a deduction to a taxpayer for part or all of the cost of certain partially qualifying commercial **building property that the taxpayer places in service after** **December 31, 2005, and before January 1, 2008**.
- [*Legislators are considering extending credit until 2015*]

## Federal Commercial Tax Credit – Whole Building Qualifications

- It is certified that the interior lighting systems, heating, cooling, ventilation, and hot water systems, and building envelope that are incorporated into the building, **will reduce the total annual energy and power costs** with respect to combined usage of the building’s heating, cooling, ventilation, hot water, and interior lighting systems **by 50 percent** or more as compared to a Reference Building that meets the minimum requirements of Standard 90.1-2001.

## Federal Commercial Tax Credit – Whole Building Qualifications

- The required 50-percent reduction must be accomplished solely through energy and power cost reductions for the heating, cooling, ventilation, hot water, and interior lighting systems. **Reductions in any other energy uses**, such as receptacles, process loads, refrigeration, cooking, and elevators, **are not taken into account** in determining whether the 50- percent reduction is achieved.

## Federal Commercial Tax Credit – Whole Building Tax Deduction

***Federal Commercial Tax Credit****** ******–****** ******Whole Building Tax Deduction***

- Shall not exceed the excess (if any) of--
- (i) $1.80 x the square footage of the building, over
- (ii) the aggregate amount of the § 179D deductions allowed with respect to the building for all prior taxable years.

## Federal Commercial Tax Credit – Partial Property Qualification

- Lighting will meet either a or b
- a. **will reduce the total annual energy and power costs** with respect to combined usage of the building’s heating, cooling, ventilation, hot water, and interior lighting systems **by** **162⁄3** %  or more as compared to a Reference Building that meets the minimum requirements of Standard 90.1-2001.

## Federal Commercial Tax Credit – Partial Property Qualification

- Lighting will meet either a or b. **Method b:**
- (i) Achieve **a reduction in lighting power density of at least 25 percent (50 percent in the case of a warehouse)** of the minimum requirements in Table9.3.1.1 or Table 9.3.1.2 (not including additional interior lighting power allowances) of Standard 90.1-2001;
- (ii) Have controls and circuiting that comply fully with the mandatory and prescriptive requirements of Standard 90.1-2001;
- (iii) Include provision for bi-level switching in all occupancies except hotel and motel guest rooms, store rooms, restrooms, and public lobbies; and
- (iv) Meet the minimum requirements for calculated lighting levels as set forth in the IESNA Lighting Handbook, Performance and Application, NinthEdition, 2000.

## Federal Commercial Tax Credit – Partial Property Qualification

- Heating, Cooling, Ventilation and Hot Water
**will reduce the total annual energy and power costs** with respect to combined usage of the building’s heating, cooling, ventilation, hot water, and interior lighting systems **by 162⁄3%** or more as compared to a Reference Building that meets the minimum requirements of Standard 90.1-2001.

## Federal Commercial Tax Credit – Partial Property Qualification

- Energy Efficient Building Envelope Property
**will reduce the total annual energy and power costs** with respect to combined usage of the building’s heating, cooling, ventilation, hot water, and interior lighting systems **by 162⁄3%** or more as compared to a Reference Building that meets the minimum requirements of Standard 90.1-2001.

## Federal Commercial Tax Credit – Partial Property Tax Deduction

- Shall not exceed the excess (if any) of--
- (i) **$0.60 x the square footage of the building** for each partial property element, over
- (ii) the aggregate amount of the § 179D deductions allowed with respect to the building for all prior taxable years.

## Certificate – certificate must include ten item list of information from address to a list identifying the energy components
Software – must be listed by DOE and must pass (ANSI/ASHRAE) Standard 140-2004 Standard Method of Test for the Evaluation of Building Energy Analysis Computer Programs – [Florida’s EnergyGauge will be modified and tested]
Tax Payer - does not need to send in certificate but should keep it on file

**Software** – must be listed by DOE and must pass (ANSI/ASHRAE) Standard 140-2004 Standard Method of Test for the Evaluation of Building Energy Analysis Computer Programs – [*Florida’s EnergyGauge will be modified and tested*]
**Tax Payer** - does not need to send in certificate but should keep it on file

***Federal Commercial Tax Credit****** ******–****** Notice 2006-52 Other Info***

## Residential

***Residential***

## Residential Tax Credits – New Home Qualifications

- 2006 and 2007 time frame
**Homes must 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)
- Must use approved software to determine compliance [*EnergyGauge USA is approved*]

## Residential Tax Credits – Sample Miami Qualifying Home

- Windows SHGC 0.28
- White barrel tile roof, R30 ceiling insulation
- Block with R7.6 insulation
- Sealed and Tested Duct System
- SEER 15 Air Conditioning
- Programmable Thermostat
- Energy Star Ceiling Fans, Refrigerator
- 72% Fluorescent lighting

## Residential Tax Credits – Sample Tampa Qualifying Home

- Windows SHGC 0.28
- White barrel tile roof, R30 ceiling insulation
- Block with R7.6 wall insulation
- Sealed and Tested Duct System
- SEER 16 HSPF 9 Heat Pump
- Programmable Thermostat
- Energy Star Ceiling Fans, Refrigerator
- 72% Fluorescent lighting

## Residential Tax Credits – Sample Dallas Qualifying Home

- Windows SHGC 0.40, U-value 0.47
- Wood frame walls with R-13 in cavity
- White shingle with R30 ceiling insulation
- Sealed and Tested Duct System
- SEER 14 HSPF 7.8 Heat Pump
- Programmable Thermostat
- Energy Star Refrigerator and Dishwasher
- 70% Fluorescent lighting

## Residential Tax Credits – Sample Houston Qualifying Home

- Windows SHGC 0.28, U-value 0.57
- Wood frame walls with R-13 in cavity
- White shingle with R30 ceiling insulation
- Sealed and Tested Duct System
- SEER 14 HSPF 7.8 Heat Pump
- Programmable Thermostat
- Energy Star Refrigerator and Dishwasher
- 70% Fluorescent lighting

## Residential Tax Credits – Sample Baltimore Qualifying Home

- Windows SHGC 0.55, U-value 0.47
- Wood frame walls w R-13 in cavity +R5 sheathing
- R30 crawlspace, R48 ceilings
- Sealed and Tested Duct System
- SEER 13, Natural Gas 0.94 AFUE furnace
- Programmable Thermostat
- Default appliances and lighting

## Residential Tax Credits – Sample Burlington Qualifying Home

- Windows SHGC 0.55, U-value 0.33
- Wood frame walls w R-13 in cavity +R5 sheathing
- R48 attic insulation with dark roof
- Basement -- R15 walls and R19 ceiling of basement
- Sealed and Tested Duct System
- SEER 13, Natural Gas 0.94 AFUE furnace
- Programmable Thermostat
- Default appliances and lighting

## Residential Tax Credits – New Home Tax Credit

- Goes to HomeBuilder
- $2000 per home

## Residential Tax Credits – Site Inspections

- Certifier inspects dwelling and confirms all features affecting  heating and cooling energy consumption comply with the design specifications provided.
- With respect to builders who build at least 85 homes a year or build subdivisions with the same floor plan using the same subcontractors, the eligible certifier may use the sampling protocol found in the current ENERGY STAR® for Homes Sampling Protocol Guidelines instead of inspecting all of the homes. The protocol guidelines can be found at:
*http://www.energystar.gov/index.cfm?c=bldrs_lenders_raters.pt_homes_policies#SamplingProtocol*

## New Manufactured Home – Qualifications

- 30% reduction in home energy use

## New Manufactured Home – Tax Credit

- Goes to HomeBuilder
- $1000 per home

## Existing Home Tax Credit

- Credit is for Qualifying Energy-Efficient Property and Improvements

## Existing home Tax Credit – Qualifying Efficiency Improvements

- 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.

## Existing home Tax Credit – Tax Credit for Efficiency Improvements

- 10% of the amount expended
- up to a maximum existing home credit limit of $500

## Existing home Tax Credit – Qualifying Energy Property

- 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 (EER varies with type)
- Central air conditioner that receives the highest efficiency tier established by the Consortium of Energy Efficiency
- Gas or oil water heater with EF or 0.80 or greater
- Gas or oil furnace or boiler with AFUE of 95% or greater
- Advanced main air circulating fan used in gas or oil furnace that uses no more than 2% of the total annual energy use of the furnace.

## Existing home Tax Credit – Tax Credit for Energy Property

- $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 other item of qualified energy property
- up to a maximum existing home credit limit of $500

## Existing home Tax Credit –Taxpayer responsibility

*Taxpayer Reliance*. Except as provided in section 4.02(3) and (6) of this notice, a taxpayer may rely on a manufacturer’s certification that a building envelope component is an Eligible Building Envelope Component. A taxpayer is not required to attach the certification statement to the return on which the credit is claimed.
- However, 1.6001-1(a) of the Income Tax Regulations requires that taxpayers maintain such books and records as are sufficient to establish the entitlement to, and amount of, any credit claimed by the taxpayer. Accordingly, a taxpayer claiming a credit for an Eligible Building Envelope Component should retain the certification statement as part of the taxpayer’s records

## Existing home Tax Credit –Manufacturer Certification Statement

- (a) The name and address of the manufacturer;
- (b) Identification of the component as an insulation material or system, an exterior window or skylight, an exterior door, or a metal roof;
- (c) The make, model number, and any other appropriate identifiers of the component;
- (d) A statement that the component is an Eligible Building Envelope Component that qualifies for the credit allowed under § 25C;
- (e) In the case of an exterior window, skylight, or door (other than a storm window or storm door), the climate zone or zones for which the applicable prescriptive criteria are satisfied;
- (f) In the case of a storm window– the applicable window and climate type
- (g) A declaration, signed by authorized person to bindthe manufacturer:
- “Under penalties of perjury, I declare that I have examined this certification statement, and to the best of my knowledge and belief, the facts are true, correct, and complete.”

## Federal Residential Solar Tax Credits

- 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.

## Federal Residential Solar Tax Credits

- For **solar electric (photovoltaic) systems**, the allowable **tax credit is 30%** of the qualified solar system expenditures up to a maximum tax credit limitation of $2,000.

## Federal Business Investment Tax Credit

- Increases from 10% (pre-2006) to **30% for investments in solar thermal and solar photovoltaic**.
- No dollar limit.

## My Questions –Federal Tax Credits

- What is the most I can get for retrofitting my home (non-solar)?
- ..
- $500

## My Questions –Federal Tax Credits

- Who gets the new home tax credit (Site-built) and how much is it worth?
- ..
- The builder and $2000

## My Questions –Federal Tax Credits

- What energy level must be achieved to qualify for the new home tax credit (Site-built)?
- ..
- 50% heating and cooling with at least 10% from the envelope

## My Questions –Federal Tax Credits

- What is the most I can get for my commercial building improvements (non-solar)?
- ..
- $1.80/square-foot

## My Questions –Federal Tax Credits

- What is the most I can get for a residential solar hot water system?
- ..
- 30% not to exceed $2000