Energy
Provisions of the American Recovery and Reinvestment Act of
2009
FS-2009-10, April 2009
(Clarified statutory language in Section 1142, 5/13/09)
The
American Recovery and Reinvestment Act of 2009 (ARRA) provides
energy incentives for both individuals and businesses.
Here
are some of the key energy provisions in ARRA that may impact
taxpayers:
Residential
Energy Property Credit (Section 1121): The new law increases
the energy tax credit for homeowners who make energy efficient
improvements to their existing homes. The new law increases
the credit rate to 30 percent of the cost of all qualifying
improvements and raises the maximum credit limit to $1,500 for
improvements placed in service in 2009 and 2010.
The
credit applies to improvements such as adding insulation, energy
efficient exterior windows and energy-efficient heating and
air conditioning systems.
A
similar credit was available for 2007, but was not available
in 2008. Homeowners should be aware that the standards in the
new law are higher than the standards for the credit that was
available in 2007 for products that qualify as “energy
efficient” for purposes of this tax credit. The IRS has
issued guidance that will allow manufacturers to certify that
their products meet these new standards.
Until
the guidance is released, homeowners generally may continue
to rely on manufacturers’ certifications that were provided
under the old guidance. For exterior windows and skylights,
homeowners may continue to rely on Energy Star labels in determining
whether property purchased before June 1, 2009, qualifies for
the credit. Manufacturers should not continue to provide certifications
for property that fails to meet the new standards.
Residential
Energy Efficient Property Credit (Section 1122): This nonrefundable
energy tax credit will help individual taxpayers pay for qualified
residential alternative energy equipment, such as solar hot
water heaters, geothermal heat pumps and wind turbines. The
new law removes some of the previously imposed maximum amounts
and allows for a credit equal to 30 percent of the cost of qualified
property. See Notice 09-41.
Plug-in
Electric Drive Vehicle Credit (Section 1141): The new law
modifies the credit for qualified plug-in electric drive vehicles
purchased after Dec. 31, 2009. To qualify, vehicles must be
newly purchased, have four or more wheels, have a gross vehicle
weight rating of less than 14,000 pounds, and draw propulsion
using a battery with at least four kilowatt hours that can be
recharged from an external source of electricity. The minimum
amount of the credit for qualified plug-in electric drive vehicles
is $2,500 and the credit tops out at $7,500, depending on the
battery capacity. The full amount of the credit will be reduced
with respect to a manufacturer's vehicles after the manufacturer
has sold at least 200,000 vehicles.
Plug-In
Electric Vehicle Credit (Section 1142): The new law also
creates a special tax credit for two types of plug-in vehicles
— certain low-speed electric vehicles and two- or three-wheeled
vehicles. The amount of the credit is 10 percent of the cost
of the vehicle, up to a maximum credit of $2,500 for purchases
made after Feb. 17, 2009, and before Jan. 1, 2012. To qualify,
a vehicle must be either a low speed vehicle propelled by an
electric motor that draws electricity from a battery with a
capacity of 4 kilowatt hours or more or be a two- or three-wheeled
vehicle propelled by an electric motor that draws electricity
from a battery with the capacity of 2.5 kilowatt hours. A taxpayer
may not claim this credit if the plug-in electric drive vehicle
credit is allowable.
Conversion
Kits (Section 1143): The new law also provided a tax credit
for plug-in electric drive conversion kits. The credit is equal
to 10 percent of the cost of converting a vehicle to a qualified
plug-in electric drive motor vehicle and placed in service after
Feb. 17, 2009. The maximum amount of the credit is $4,000. The
credit does not apply to conversions made after Dec. 31, 2011.
A taxpayer may claim this credit even if the taxpayer claimed
a hybrid vehicle credit for the same vehicle in an earlier year.
Treatment
of Alternative Motor Vehicle Credit as a Personal Credit Allowed
Against AMT (Section 1144): Starting in 2009, the new law
allows the Alternative Motor Vehicle Credit, including the tax
credit for purchasing hybrid vehicles, to be applied against
the Alternative Minimum Tax. Prior to the new law, the Alternative
Motor Vehicle Credit could not be used to offset the AMT. This
means the credit could not be taken if a taxpayer owed AMT or
was reduced for some taxpayers who did not owe AMT.
New
Clean Renewable Energy Bonds (Section 1111): The new law
increases the amount of funds available to issue new clean renewable
energy bonds from the one-time national limit of $800 million
to $2.4 billion. These qualified tax credit bonds can be issued
to finance certain types of facilities that generate electricity
from renewable sources (for example, wind and solar).
Qualified
Energy Conservation Bonds (Section 1112): The new law increases
the amount of funds available to issue qualified energy conservation
bonds from the one-time national limit of $800 million to $3.2
billion. These qualified tax credit bonds can be issued to finance
governmental programs to reduce greenhouse gas emissions and
other conservation purposes.
Extension
of Renewable Energy Production Tax Credit (Section 1101):
The new law generally extends the “eligibility dates”
of a tax credit for facilities producing electricity from wind,
closed-loop biomass, open-loop biomass, geothermal energy, municipal
solid waste, qualified hydropower and marine and hydrokinetic
renewable energy. The new law extends the "placed in service
date" for wind facilities to Dec. 31, 2012. For the other
facilities, the placed-in-service date was extended from December
31, 2010 (December 31, 2011 in the case of marine and hydrokinetic
renewable energy facilities) to Dec. 31, 2013.
Election
of Investment Credit in Lieu of Production Credit (Section 1102):
Businesses who place in service facilities that produce
electricity from wind and some other renewable resources after
Dec 31, 2008 can choose either the energy investment tax credit,
which generally provides a 30 percent tax credit for investments
in energy projects or the production tax credit, which can provide
a credit of up to 2.1 cents per kilowatt-hour for electricity
produced from renewable sources. A business may not claim both
credits for the same facility.
Repeal
of Certain Limits on Business Credits for Renewable Energy Property
(Section 1103): The new law repeals the $4,000 limit on
the 30 percent tax credit for small wind energy property and
the limitation on property financed by subsidized energy financing.
The repeal applies to property placed in service after Dec.
31, 2008.
Coordination
With Renewable Energy Grants (Section 1104): Business taxpayers
also can apply for a grant instead of claiming either the energy
investment tax credit or the renewable energy production tax
credit for property placed in service in 2009 or 2010. In some
cases, if construction begins in 2009 or 2010, the grant can
be claimed for energy investment credit property placed in service
through 2016, and for qualified renewable energy facilities,
the grant is 30 percent of the investment in the facility and
the property must be placed in service before 2014 (2013 for
wind facilities).
Temporary
Increase in Credit for Alternative Fuel Vehicle Refueling Property
(Section 1123): The new law modifies the credit rate and
limit amounts for property placed in service in 2009 and 2010.
Qualified property (other than property relating to hydrogen)
is now eligible for a 50 percent credit, and the per-location
limit increases to $50,000 for business property (increases
to $2,000 for other/residential locations). Property relating
to hydrogen keeps the 30 percent rate as before, but the per-business
location limit rises to $200,000.
reprinted
from irs.gov
