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New Homes Tax Credit

New Homes Tax Credit. TIAP Webinar Steve Baden - RESNET www.resnet.us. Federal Tax Credit for New Homes. Site Built Homes

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New Homes Tax Credit

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  1. New Homes Tax Credit TIAP Webinar Steve Baden - RESNET www.resnet.us

  2. Federal Tax Credit for New Homes Site Built Homes $2,000 to builder for each home whose performance is calculated to exceed Heating and Cooling Use of Section 404 of 2004 Supplement of the IECC by 50% (Does not count water heating/renewable energy production – covered by other incentives)

  3. Federal Tax Credit for New Homes Effective Dates Homes built after August 2005 and purchased between January 1, 2006 and January 1, 2008

  4. Federal Tax Credit for New Homes IRS Rule – IRS 2006-27 + 3rd Party Inspection Required – Certified by RESNET or Equivalent Rating Certification Organization + Software Tool Must Comply with RESNET Software Test Specifications

  5. www.resnet.us/standards/tax_credits/procedures

  6. RESNET Federal Tax Credit Software Specifications + Auto-Generation of the Reference Homes (2004 Supplement to IECC) + HERS BESTEST + RESNET HVAC Tests + Duct Distribution System Efficiencies Tests

  7. Federal Tax Credit Software Tools Accredited by RESNET + Energy Gauge USA (Florida Solar Energy Center) + Micropas (Enercomp, Inc.) + REM/Rate (Architectural Energy Corporation) + Builder Energy Solutions (ICF Resources)

  8. RESNET Federal Tax Credit Inspection Specifications + Homes Shall be Independently Field Tested + Field Verification Shall Follow RESNET’s Home Energy Rating Procedures + Person Who Certify Home’s Qualification for Tax Credit Shall be Trained and Certified in Accordance with RESNET’s National Home Energy Rating Procedures

  9. Tax Incentives for Home HVAC Equipment and Appliances Presented at Tax Incentives Assistance Project Webinar 21 July 2006 David B. Goldstein, Ph.D. Natural Resources Defense Council San Francisco dgoldstein@nrdc.org

  10. Goals of the Tax Incentives • Make highest efficiency products available to everyone • Attract market attention with multi-year incentives • Harmonize with existing programs • Consortium for Energy Efficiency (CEE) • Energy Star

  11. HVAC Program Status • Original intent was a 4-5 year program • Manufacturers have indicated that this is the time needed to justify major investments in production capacity for high-efficiency equipment • EPAct Incentives were trimmed to 2 years (2006-2007) • Snow/Feinstein Bill, S. 3628 extends the program to 5 years (adds 2008-2010)

  12. How Do You Qualify? • Manufacturer certifies eligibility • Online resources show product availability: • www.energytaxincentives.org • www.cee1.org/resid/rs-ac/rs-ac-main.php3 • www.gamanet.org/gama/inforesources.nsf/vContentEntries/Product+Directories?OpenDocument • www.energystar.gov/index.cfm?c=products.pr_tax_credits#1 • Limited to taxpayer’s principal residence

  13. Qualifying Levels of Efficiency I

  14. Qualifying Levels of Efficiency II

  15. Product Availability • The goal of multi-year incentives is to increase availability and demand dramatically • This is beginning to work: • Air conditioners: thousands of products are now available compared to about 5 in 2004 • Furnaces: about 100 qualifying products are available

  16. Appliances • A manufacturer credit: consumers don’t see the money • Likely to lead to more products and greater availability at CEE and Energy Star levels • Eligible products can be found at : http://www.energystar.gov/index.cfm?fuseaction=find_a_product.

  17. Qualifying Products • Refrigerators: Incentives for Energy Star and CEE Tier 1 and Tier 2 products (15%, 20% and 25% below federal standards) • Clothes washers: 2007 Energy Star level (1.72 MEF, 8.0 WF) • Dishwashers: 2007 Energy Star level (.65 EF)

  18. Solar - Residential and Commercial ITC Colin Murchie, Director of Government Affairs Solar Energy Industries Association (202) 682 0556 x 2 cmurchie@seia.org

  19. Solar - Residential and Commercial ITC • 30% Credit on Capital Costs through 2007 • 26 USC 48 • Permanent 10% Commercial ITC • For solar water heating, air heating, lighting, PV • Includes equipment and installation • 5 – year carryforward

  20. Credit Limitations and Requirements • Pool Heating Equipment Ineligible • $2,000 cap for residential systems • SRCC (www.solar-rating.org) or state certification of heating equipment • AMT ineligible • AMT eligibility effort underway – www.seia.org • Non-transferable • Sale – leasebacks permitted, ownership required

  21. Additional Resources • www.findsolar.com • Contractors, reviews, recommendations, etc. • www.dsireusa.org • All state incentives • www.seia.org • Credit extension effort • Tax Manual • continuous updates • IRS precedent

  22. Qualifying for the New Home Tax Credit Examples in 9 U.S. Cities TIAP Web Seminar July 21, 2006 Philip Fairey

  23. Introduction • Simulations and calculations performed using EnergyGauge® USA – qualified through software tests required by RESNET Pub 005-01 • Only one of many possible solutions provided for each climate (best orientation) • No mechanical ventilation – all homes with natural infiltration at 0.35 ach • All insulation is assumed installation Grade I • Results indicate that many new homes, in all parts of the country, may ultimately qualify for federal tax credits.

  24. Home Characteristics * Very similar to examples provided by Micropas

  25. Envelope Characteristics * Light in color

  26. Window Characteristics * To follow Micropas example

  27. Lighting & Appliances * high-efficiency fixtures / qualifying fixture locations

  28. HVAC Equipment * tight = tested to 3 cfm 25,out per 100 ft2 conditioned area

  29. Conclusions • Qualification not difficult in very mild climates • Window selection is important, with changes in SHGC making a significant difference, even in northern climates • Efficient lighting and appliances provide significant benefit in cooling dominated climates • Relatively “standard” envelope features can make the goal with only “moderate” increases in HVAC efficiencies if ducts are good • Tight ducts located in conditioned space provide significant benefit for both heating and cooling.

  30. Tax Credit Software • Software providing for analysis for tax credit qualification available to anyone • Software for “certification” purposes is only available to IRS “certifiers” • ‘Try before You Buy’ Software is available online as a free downloadable at http://EnergyGauge.com

  31. Integrating Tax Incentives into Energy Efficiency Programs Rick Gerardi Director, Residential Programs NYSERDA

  32. New Homes • Planning on a “Better-Best” Strategy • “Better” = New York ENERGY STAR® Labeled Homes – core voluntary program - Continued training and technical assistance to builders - NY Incentives of $750- $1000 per home - 13% market share • “ENERGY STAR Best of the Best” = tax credit-eligible homes and fulfill NYS requirements with additional specs • - Additional training and technical assistance to builders and Raters • - Combination of NY incentives and tax credit built into software • - Targeted mid-stream marketing

  33. Existing Homes • Home Performance with ENERGY STAR® • Program which promotes comprehensive retrofits to address comfort, health, safety and energy • Typically achieving 30% energy savings • $500 federal tax incentive a modest sweetener • We will tell homeowners about • Not a major part of promotion • A performance-based incentive with higher incentives for high savings will better complement our program • E.g. as in the new Snowe-Feinstein bill • Software documentation of energy percentage savings

  34. ENERGY STAR® Labeled Products • Planning a “best of the best” campaign to promote high-efficiency appliances and other products which exceed Energy Star criteria - Will better align with tax credit eligibility in 2006 • In 2007, Energy Star and tax credits will align for clothes washers and dishwashers but not refrigerators • - “Best of the best” will still be important for levels above • ENERGY STAR

  35. Moving Forward • Tax incentive levels and structure should be reexamined as part of extension discussions • Restructuring particularly needed for existing homes • ENERGY STAR should keep its specifications up-to-date • E.g. refrigerator specification needs updating • “ENERGY STAR Best of the Best” to increase specification levels when a state exceeds its ENERGY STAR market transformation goals • NY will continue fine-tuning programs to maximize savings and cost-effectiveness through market-based strategies

  36. Commercial Buildings Tax Deduction Ed Gray Director, Energy Infrastructure National Electrical Manufacturers Association

  37. Commercial Buildings Tax Deduction Provides for energy efficient systems deduction up to $1.80 per square foot for whole buildings using 50% less energy on a cost basis than a building designed to ASHRAE/IESNA 90.1-2001, as of April 2001. Or $0.60 per square foot for systems improvements proportional to 50% energy savings for a whole building. Systems include lighting, HVAC/water heating, and building envelope. There is a special provision for federal, state or local government owned buildings • Asset owner gets the deduction • Allowable for assets placed in service from 1/1/06 through 12/31/07 • For government buildings, the person primarily responsible for the design gets the deduction • Lighting systems have an interim provision, so that design doesn’t have to wait on IRS regulations • Certified designers, software, and inspectors must be used

  38. Tax Rule Schedule • IRS Notice 2006-52 includes self certification concept for design, software, inspection; forms showing technical basis to be retained by taxpayer, but not sent in with return • Government buildings rules to be included in another Notice • “Regulation” to be done later to include detailed rules • “Certified” software likely to be available soon • Interim lighting rules enable work to be done before regulations done • Stakeholders need to review IRS work for potential comments

  39. IRS Clarified Issues • International Revenue Service Notice 2006-52 contains guidance; corrected version in Internal Revenue Bulletin 2006-26 dated June 26, 2006 • Certifier and inspector may be professional engineer or contractor licensed in the building’s jurisdiction • Software to be self-certified, to be listed on DOE website • Inspector cannot be an employee of asset owner

  40. Alternatives for Deduction • Whole building 50% energy cost reduction • Partial Deduction – Lighting Target • Partial Deduction – HVAC Target • Partial Deduction – Envelope Target • Interim Lighting Rules* using ASHRAE prescriptive lighting tables (9.3.1.1 and 9.3.1.2) *Interim Lighting Rules only in effect until final regulations are published in Federal Register, NEMA has requested that “interim” rule alternative be made permanent

  41. Whole Buildings • Reference Building meets Standard 90.1 minimum requirements in the manner specified • Performance Rating Method (PRM) used to determine energy and power cost reduction percentage of proposed building compared to reference building (50% and 16.7% targets) • Baseline reference building performance uses PRM in Appendix G of ASHRAE Standard 90.1-2004 • California Title 24 “ACM” requirements: • Internal loads (Tables N2-2 and N2-3) • Infiltration modeling (Section 2.4.1.6) • Luminaire power from Appendix NB (or manufacturers data)

  42. 50% Below 90.1-2001 Buildings • Achieved for a small number of existing buildings • Additional systems in the Technical Explanation of the legislation are not in the IRS guidance (renewable on-site generation, daylighting, efficient wiring, and others) • A high degree of systems integration; and careful site selection and orientation needed

  43. Typical Design Features • Efficient envelope systems • High performance glazing and selective orientation with solar control • Daylighting • High efficiency lighting and controls • High efficiency HVAC and controls • Ventilation control and heat recovery

  44. PRM Information • ASHRAE Standard 90.1-2004 (on-line, read-only) • 2005 California Title 24 Nonresidential Alternative Calculation Method (ACM) Approval Manual http://www.energy.ca.gov/title24/2005standards/nonresidential_acm/index.html • DOE list of approved software http://www.eere.energy.gov/buildings/info/tax_credit_2006.html • NREL “Energy Savings Modeling and Inspection Guidelines for Commercial Building Federal Tax Deductions”

  45. EPAct 2005 System Deduction • Provides for partial deduction for 3 major systems (lighting, HVAC/water heating, building envelope) that correspond to 50% reduction in building energy use • IRS Notice 2006-52 states that 16.7% whole building savings are the system goal for each system • Requires building modeling using certified software • Software will be listed on a DOE website • NEMA has commented that the reference building, from a lighting perspective, need only be based on the space use, LPD and square feet; it is not necessary to develop site specific references for lighting

  46. System Deduction • IRS decision of 1/3 split means 16.7% energy cost reduction for each system (1/3 of 50%) • Retail example using “custom targets”: • Envelope: 22% of cost; 11% savings target • Lighting: 28% of cost; 14% savings target • Mechanical: 50% of cost; 25% savings target • One-third split targets may be hard to meet

  47. Interim Lighting Provision Until such time that final IRS rules are promulgated, lighting systems are eligible for a partial deduction. Key provisions: • Deduction is $0.30 to $0.60 for 25 to 40% under ASHRAE LPDs, respectively, from Table 9.3.1.1 or 9.3.1.2. “Use it or lose it” allowances are not to be considered in the LPD reduction • Warehouses must be 50% under to get $0.60 (no sliding scale) • ASHRAE controls + “bi-level switching” required • Industry has asked that provision be made permanent as the lighting system deduction

  48. Continuing Actions • Convene technical stakeholders group to resolve details of ASHRAE vs. California methods and reference building • Extend tax provision (several bills already introduced in Congress) • Determine if other provisions need legislative solutions • Continue promotional program

  49. Further Information • http://www.efficientbuildings.org • http://www.lightingtaxdeduction.org • http://www.energytaxincentives.org/tiap-commercial-bldgs.html • http://www.advancedbuildings.net/

  50. Vehicle Tax IncentivesTIAP Webcast Therese Langer ACEEE Transportation Program July 21, 2006

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