Energy Policy Act

What is the 2005 Energy Policy Act?
After over two years of debate, Congress finally passed the 2005 Energy Policy Act and it was signed into law by President Bush on August 5. The bill was created to determine a formal future energy policy for the United States reacting to the various energy supply and cost issues now facing us.

What does it contain?
The bill contains a number of sections that address specific issues concerning energy. The broad areas covered are oil and gas productions, electricity reliability, renewable/clean energy sources, clean coal and energy efficiency/conservation. Of these, the last area offers the best opportunity for us in the radiant barrier, insulation, and window industry. Of specific interest are tax credits for existing homes and tax credits for commercial buildings. Let's look at each of these.

What are tax credits for existing homes?
For existing homes, a tax credit of 10% of energy efficiency improvements to the building envelope, up to $500 - with no more than $200 attributed to windows, is available to the homeowner for qualifying energy improvements to the thermal envelope as defined in the energy criteria in the IECC. This credit also goes into effect January 1, 2006 and expires December 31, 2007. Credit applies to the purchase of energy-efficient items installed in the taxpayers main home in the United States and does not apply to the onsite installation of materials or systems.

The Internal Revenue Service recently published Guidance Notices for tax credits on home improvements made between January 1, 2006 and December 31, 2007. Included in the Guidance is a special rule that states:

"A taxpayer may treat an exterior window or skylight that bears and ENERGY STAR label and is installed in the region identified on the label as an Eligible Building Envelope Component and may rely on such ENERGY STAR label, rather than on a manufacturer's certification statement, in claiming the 25C credit."

This rule makes it easy for consumers, manufacturers, retailers, and building contractors to identify eligible products and apply for the tax credit. Homeowners are advised to keep the Energy Star label, the National Fenestration Rating Council (NFRC) label, and purchase receipts as proof for the IRS in the event of an audit.

Are there tax credits for commercial buildings?
The owner of a commercial building, and this includes residential multi-family dwellings, can receive a tax credit in the form of a deduction of up to $1.80 per square foot for buildings that reduce energy usage by 50% over ASHRAE 90.1-2001. Or, the owner can claim a $.60 per square foot deduction for a 50% reduction in the cost of energy in any of the following three building systems: envelope, HVAC, lighting. The time period for this credit is also January 1, 2006 through December 31, 2007. How other energy saving products fit into this or how the building qualifies has yet to be determined.

Click to download a 36 page PDF guide: Energy Savers - Tips on Saving Energy and Money at Home.