Energy Tax Incentives
The new law provides several energy-related tax provisions intended to provide incentives for producing and conserving energy from renewable sources. Examples of these provisions include:
Non-business Energy Credits.— Current tax law (Section 25C) allows tax credits for making certain energy-efficient improvements (new insulation or exterior windows and doors, for example) to existing residential property and for purchasing specified energy-efficient property (e.g., heat pumps). The 2009 Act extends these tax credits through 2010. For 2009 and 2010, the credit percentage for qualified energy-efficient improvements made during the tax year increases from 10% to 30%, and energy-efficient property purchases also are eligible for a 30% credit. There is an aggregate cap on the credits of $1,500 for property placed in service in 2009 and 2010. Other changes apply.
Removal of Dollar Limits on Certain Energy Credits.— Under pre-2009 Act law, businesses may claim a 30% business energy tax credit for certain small wind energy property, with a cap of $4,000 a year. Individuals may claim a 30% credit for qualified solar water heating property ($2,000 cap), qualified small wind energy property ($4,000 cap), and qualified geothermal heat pumps ($2,000 cap). The 2009 Act repeals all of the above caps, effective for tax years beginning after 2008.
Renewable Electricity Production Credit.— The tax law allows an income-tax credit for the production of electricity from qualified energy resources at qualified facilities. The 2009 Act extends the period during which qualified facilities producing electricity from wind, closed-loop biomass, open-loop biomass, geothermal energy, municipal solid waste, qualified hydropower production, and marine and hydrokinetic renewable energy may be placed in service and qualify for the credit through 2013 (2012 for wind facilities).
Qualified Advanced Energy Manufacturing Project Credit.— The new law provides a 30% credit for investment in qualified property (buildings are excluded) used in a qualified advanced energy manufacturing project associated with fuel cells, battery technology, renewable energy production technologies, efficient transmission and distribution of electricity, and carbon dioxide capture and sequestration. Additional requirements apply.
Plug-in Electric Vehicle Credit.— The existing plug-in electric drive motor vehicle credit is modified by excluding low-speed vehicles. A new 10% nonrefundable credit (up to $2,500) is allowable for low-speed vehicles, motorcycles, and three-wheeled vehicles that otherwise meet the law’s requirements. The new credit is in effect for vehicles bought after the enactment date of the new law through December 31, 2011.
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