Section 1331. Energy Efficient Commercial Buildings (pages 1333-1344)

Commercial buildings may qualify for a tax deduction from income rather than as a depreciable asset over many years for installations in tax years 2006 and 2007 of costs of reducing their energy use by 50 percent or more in comparison to meeting ASHRAE 90.1-2001. The maximum deduction is $1.80 times the square footage of the building. If only portions of the HVAC and/or lighting system meet the 50% reduction, then the maximum is $.60 times the square footage of the building. Any expenses beyond the allowable amount must be capitalized and depreciated as they normally would be.

If the property is owned by a Federal, state, local government or school district, the deduction will go to the designer. IRS rules will be created to specify how this will be applied.

Section 1332. Credit for Construction of New Energy Efficient Homes (pages 1345-1352)

For tax years 2006 and 2007, a builder or manufacturer of a home may receive a tax credit for homes completed after the energy bill is signed and sold for use as a residence in 2006 or 2007. A $2,000 tax credit is allowed for these new homes that are 50% more efficient than a home built to the IECC 2003 and with heating and air conditioning equipment meeting the minimum federal standards. The building envelope must account for 1/5th of the 50%.

A manufactured home producer may also qualify for a $1,000 tax credit if the manufactured home meeting HUD standards is 30% more efficient than a home built to the IECC 2003 and with minimum efficiency HVAC equipment. The building envelope must account for 1/3rd of the 30%. Or, the manufactured home qualifies if it is ENERGY STAR certified.

These tax credits are also applicable to substantial reconstruction and rehabilitation. IRS will provide guidance on how certification for tax credit purposes shall be accomplished, after consultation with the Dept. of Energy.

Title XIII—Energy Policy Tax Incentives
Subtitle C—Conservation and Energy Efficiency Provisions

Section 1333. Credit for Certain Nonbusiness Energy Property (Pages 1352-1364)

This section provides tax credits for homeowners, including HUD manufactured homes and condos, for installations completed in 2006 and 2007. Homeowner-builders who are not able to use the builder tax credit should be able to qualify for these credits, unless IRS disqualifies new construction.

If the installation cost is less than the following tax credit amounts, the tax credit will equal the cost of installation:
The tax credit for an ECM furnace fan is $50.
The tax credit for a natural gas, propane or oil furnace or boiler with an AFUE of 95% or higher is $150.
The tax credit is $300 for:
1.a central air conditioner with a SEER at least 15, EER at least 12.5 and HSPF at least 8.5
2.an electric heat pump with an HSPF at least 9, a SEER at least 15 and an EER at least 13;
3.a geothermal heat pump with a closed loop system with an EER at least 14.1 and a COP at least 3.3;
4.a geothermal heat pump with an open loop system, an EER at least 16.2 and a COP at least 3.6;
5.a natural gas, propane or oil water heater with an energy factor at least .80.

Title XIII—Energy Policy Tax Incentives
Subtitle C—Conservation and Energy Efficiency Provisions

Section 1335. Credit for Residential Energy Efficient Property (Pages 1375-1384)

An individual tax payer may receive a tax credit for 30% of the cost of residential renewable energy installations made in 2006 or 2007 for new and existing homes with the following maximum tax credits:

1.Photovoltaic (PV): maximum $2,000
2.Solar water heater: maximum $2,000
3.Fuel cell: maximum $500 per kW of capacity

Any reimbursement received as a grant from a government or utility program must be subtracted from the cost of installation in calculating the 30 percent.

Tax credits that exceed limits for a taxpayer in one year can be carried forward to the next year.

Title II—Renewable Energy
Subtitle A—General Provisions

Section 206. Renewable Energy Security
Subsection (c) and (a)(6)—Rebate Program (Pages 176-180)

Rebate grants up to $3,000 based on 25% of the cost of installation will be provided by the U.S. Department of Energy under a new program for residential or small commercial installation of a renewable energy system in 2006, 2007, 2008, 2009 or 2010.

Renewable energy system means solar, wind, geothermal and biomass (& biogas) used for heating or cooling, water heating, or electric generation for a dwelling. Biomass systems must have a thermal combustion efficiency of at least 75 percent.

If a tax credit is being used with the installation, the cost of installation must be reduced by the amount of this rebate for calculating the tax credit.