Mechanical Insulation Installation Incentive Act of 2023

To amend the Internal Revenue Code of 1986 to provide a credit for the labor costs of installing mechanical insulation property. 1. Short title This Act may be cited as the Mechanical Insulation Installation Incentive Act of 2023 2. Labor costs of installing mechanical insulation property (a) In general Subpart D of part IV of subchapter A of chapter 1 45BB. Labor costs of installing mechanical insulation property (a) In general For purposes of section 38, the mechanical insulation labor costs credit determined under this section for any taxable year is an amount equal to 10 percent of the mechanical insulation labor costs paid or incurred by the taxpayer during such taxable year. (b) Mechanical insulation labor costs For purposes of this section— (1) In general The term mechanical insulation labor costs (2) Mechanical insulation property The term mechanical insulation property (A) placed in service in connection with a mechanical system which— (i) is located in the United States, and (ii) is of a character subject to an allowance for depreciation, (B) in a manner that meets or complies with the minimum requirements of Reference Standard 90.1 (as defined in section 179D(c)(2)), and (C) the installation of which results in a reduction in energy loss from such mechanical system. (c) Termination This section shall not apply to mechanical insulation labor costs paid or incurred after December 31, 2028. . (b) Credit allowed as part of general business credit Section 38(b) of such Code is amended by striking plus , plus (42) the mechanical insulation labor costs credit determined under section 45BB(a). . (c) Conforming amendments (1) Section 280C of such Code is amended by adding at the end the following new subsection: (i) Mechanical insulation labor costs credit (1) In general No deduction shall be allowed for that portion of the mechanical insulation labor costs (as defined in section 45BB(b)) otherwise allowable as deduction for the taxable year which is equal to the amount of the credit determined for such taxable year under section 45BB(a). (2) Similar rule where taxpayer capitalizes rather than deducts expenses If— (A) the amount of the credit determined for the taxable year under section 45BB(a), exceeds (B) the amount of allowable as a deduction for such taxable year for mechanical insulation labor costs (determined without regard to paragraph (1)), the amount chargeable to capital account for the taxable year for such costs shall be reduced by the amount of such excess. . (2) The table of sections for subpart D of part IV of subchapter A of chapter 1 of such Code is amended by adding at the end the following new item: Sec. 45BB. Labor costs of installing mechanical insulation property. . (d) Effective date The amendments made by this section shall apply to amounts paid or incurred after December 31, 2023, in taxable years ending after such date.

Summary: Mechanical Insulation Installation Incentive Act of 2023 This bill allows a tax credit through 2028 for 10% of the labor costs of installing mechanical insulation property. The bill defines mechanical insulation property as insulation materials, and facings and accessory products placed in service in connection with a mechanical system that (1) is located in the United States; (2) meets or complies with the minimum requirements of Reference Standard 90.1 (published by the American Society of Heating, Refrigerating, and Air Conditioning Engineers and the Illuminating Engineering Society of North America); and (3) results in a reduction in energy loss from such system after its installation.