Department of the Treasury Releases Rules for Federal Residential Energy Efficiency Tax Credits

Summary of IRS Residential Tax Credits

Legislation Introduced in the U.S. Senate to Extend Federal Tax Credit for Energy Efficient Homes

RESNET's voice has been heard in Washington. An one year extension of the $2,000 new energy efficient homes tax credit has been included in an omnibus tax extension legislation that is awaiting a vote in the U.S. Senate. The legislation would also retroactively authorize credit back to January 1, 2010. The legislation has been held up by Republican Senator Jim Bunning of Kentucky over how the credits will be paid for. There is significant pressure building on Senator Bunning to free this political popular bi-partisan legislation for a vote. The Washington Post reports that Senate Democratic and Republican leaders are near an agreement with Senator Bunning to end his blockage of the bill.
The Internal Revenue Service has issued Internal Revenue Bulletin: 2008-12 / Notice 2008-35 titled: Amplification of Notice 2006-27 Certification of Energy Efficient Home Credit. This notice expands the eligibility for the federal energy tax credit to include apartments that are rented. This expansion of the federal tax credit opens up many new opportunities.
Today when the U.S. House of Representatives voted to approve the Emergency Economic Stabilization Act (H.R.1424), it included a provision for extending the New Energy Efficient Home Credit. This means that the Federal tax credit for new homes is extended for an additional year and will be available through December 31, 2009.
The IRS has issued the rules for the new federal tax credits for residential energy efficiency available under the Energy Policy Act of 2005.

Energy Efficient Homes
Under the provision for energy efficient homes, an eligible contractor who constructs a qualified new energy efficient home may qualify for a credit of up to $2,000. The credit is available for all new homes, including manufactured homes constructed in accordance with the Federal Manufactured Homes Construction and Safety Standards.

The home qualifies for the credit if:

It is located in the United States;
Its construction is substantially completed after August 8, 2005;
It meets the statutory energy saving requirements, and
It is acquired from the eligible contractor after December 31, 2005, and before January 1, 2008, for use as a residence.
This was extended to December 31st, 2008 (the date that the house is inspected and built).
In general, to meet the energy saving requirements, a home must be certified to provide a level of heating and cooling energy consumption that is at least 30 to 50 percent in the case of manufactured homes, and 50 percent for other homes below that of a comparable home constructed in accordance with the standards of the 2004 Supplement to the 2003 International Energy Conservation Code. It must also have building envelope component improvements providing a level of heating and cooling energy consumption that is at least 10 percent below that of a comparable home.

Manufactured homes can also qualify for the credit by meeting Energy Star standards.

Site-built homes qualify for a $2,000 credit if they reduce energy consumption by 50 percent relative to the International Energy Conservation Code standard. Manufactured homes qualify for a $1,000 or $2,000 credit depending on the level of energy savings achieved. The guidance provides information about the certification process that a builder must complete to qualify for the credit. The guidance also provides for a public list of software programs that may be used in calculating energy consumption for purposes of obtaining a certification.

In late May, 2006, Enercomp requested that RESNET revise its rules to use the normalized modified loads approach contained in the full RESNET documents. This change is needed to properly value heating vs. cooling energy when gas heating is used. Read Enercomp's letter here. RESNET has responded that it will change the rules in this letter. At this time, however, RESNET/IRS/DOE have not yet published the corrected rules.

If you have any questions about IRS Energy Tax Credit, please call Mark Gallant at Gallant Energy Consulting at 760-743-5408.

Please check back for more information.

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