New Tax Laws Affecting Alternative Energy
Jan 20, 2009
The US Department of Energy has recently updated its general information site called Tax Breaks for Businesses, Utilities, and Governments.
There are huge savings available for both commercial accounts (businesses, utilities, and government) and consumers.
The recently passed Emergency Economic Stabilization Act of 2008 (P.L. 110-343) included, extended and/or amended many offered for businesses, utilities, and government originally introduced in the Energy Policy Act of 2005 (EPACT). The bill also included tax incentives for consumers. For a complete summary of the tax incentives included in the bill, download the summary of Energy Tax Incentives in The Emergency Economic Stabilization Act of 2008.
The following types of incentives on the commercial side are covered in the bill:
Renewable Energy Incentives
These incentives include tax credits for production and facilities using wind, refined coal, geothermal, biomass, solar, and combined heat and power systems. In addition, $800 million of Clean Renewable Energy Bonds (CREBs) are authorized to finance renewable facilities.
Transportation & Domestic Fuel Security
These incentives provide tax credits for alternative fueling stations, cellulosic biofuel facilities, and for alternative fuel production, including biofuels, biomass gas versions of liquefied petroleum gas, liquefied or compressed natural gas, and aviation fuels. Idle reduction units and advanced insulation for heavy vehicles are also provided a tax exemption.
Energy Conservation and Efficiency
These incentives provide financing and incentives for state and local governments to reduce greenhouse emissions, for builders and developers to build efficient buildings or to improve existing buildings, and for manufacturers to produce efficient appliances. In addition, these incentives allow for swifter recovery of the cost of smart electric meters and grid equipment.
Consumer Energy Tax Incentives include such breaks as:
Home Energy Efficiency Improvement Tax Credits
Consumers who purchase and install specific products, such as energy-efficient windows, insulation, doors, roofs, and heating and cooling equipment in the home can receive a tax credit of up to $500 for improvements “placed in service” starting January 1, 2009 through December 31, 2009. The ENERGY STARÂ® website has a complete summary of energy efficiency tax credits available to consumers.
Residential Renewable Energy Tax Credits
Consumers who install solar electric systems can receive a 30% tax credit for systems placed in service from January 1, 2006 through December 31, 2016; the previous tax credit cap of $2,000 no longer applies. In addition, consumers who install small wind systems can receive a tax credit up to $4,000. Geothermal heat pumps also qualify for tax credits up to $2,000.
Automobile Tax Credits
Individuals and businesses who buy or lease a new hybrid gas-electric car or truck are eligible for an income tax credit for vehicles “placed in service” after January 1, 2006 and purchased on or before December 31, 2010. The amount of the credit depends on the fuel economy, the weight of the vehicle, and whether the tax credit has been or is being phased out. Hybrid vehicles that use less gasoline than the average vehicle of similar weight and that meet an emissions standard qualify for the credit. There is a similar credit for alternative-fuel, diesel, and fuel-cell vehicles.
This tax credit will be phased out for each manufacturer once that company has sold 60,000 eligible vehicles. At that point, the tax credit for each company’s vehicles will be gradually reduced over the course of another year. Read the IRS’s Summary of the Credit for Qualified Hybrid Vehicles for information on the status of specific vehicle eligibility.
If individuals and businesses buy more than one vehicle, they are eligible to receive a tax credit for each. If a tax-exempt organization buys such a vehicle, the retailer is also eligible to receive another credit. Companies that buy heavy-duty hybrid trucks are also eligible for a larger tax credit.
Consumers who purchase plug-in electric drive vehicles can also receive a tax credit. The credit for passenger vehicles and light trucks ranges from $2,500 to $7,500 based on the tax code formula.
Taxpayers may claim the full amount of the allowable credit up to the end of the first calendar quarter after the quarter in which the total number of qualified plug-in electric drive vehicles sold in the U.S. exceeds 250,000.
The Obama Administration has promised to continue its push for more tax incentives for renewable and alternative energy â€“so this Act is surely just a start.
Here’s to a Greener Tomorrow…Today.