The American Recovery and Reinvestment Act of 2009 Part 3

Summary of Provisions From Senate Finance, House Ways & Means Committees
(This information is subject to change, pending the approval of the Senate, House and President) 

Tax Provisions Related to Energy 

Homeowners Energy Credit Increased and Extended to 2010 

Homeowners will be able to take a nonrefundable credit (i.e. you must have a tax liability that the credit can reduce) of up to $1,500 for making qualified energy saving improvements to their homes. The credit is equal to 30% of the cost, including installation, of these improvements up to the $1,500 maximum. Qualified improvements include energy efficient building property (electric heat pumps, central air conditioners and water heaters), oil furnaces and hot water boilers, and exterior windows, doors, certain roofing materials, and skylights.

Residential Energy Efficient Property Credit Cap Eliminated 

Beginning in 2009 the limits on qualified: solar water heating property, small wind energy property, and geothermal heat pump property have been eliminated. An individual is allowed a 30% credit for the purchase of residential energy efficient property, such as those listed above as well as qualified solar energy property and qualified fuel cell property, up to a maximum credit of $500 for each 0.5 kilowatt of capacity.

Plug-in Electric Motor Vehicle Credit Modified 

In October of 2008 a credit for plug in electrical vehicles was enacted that provided a credit based upon the weight and battery capacity of the vehicle. Plug in vehicles purchased in 2009 through 2014 are eligible for the credit. The new law provides for a credit equal to $2,500 plus $417, in the case of a vehicle that draws propulsion energy from a battery with not less than 5 kilowatt hours of capacity, plus $417 for each kilowatt hour of battery capacity in excess of 5 kilowatt hours. The amount of the credit so computed is limited to $5,000. The revised credit is for vehicles purchased after Dec. 31, 2009. The credit begins to be phased out in the second calendar quarter after the 200,000 unit is sold in the U.S. The new law also limits the credit to vehicles weighting 14,000 pounds or less. The new law also creates a new 10% credit, up to $4,000, for the cost converting any motor vehicle into a qualified plug-in electric drive motor vehicle. The qualified plug-in traction battery module must have a capacity of at least 4 kilowatt-hours.

New Credit for Low Speed Electric Vehicles and Two and Three Wheeled Vehicles 

The new law creates a 10% nonrefundable personal credit for electric drive low-speed vehicles, motorcycles, and three-wheeled vehicles. The maximum credit for these vehicles is $2,500 and must be purchased after the law is enacted and before 2012.

Production Tax Credit Is Extended  

The new law extends the placed in service date to qualify for the electricity production tax credit through 2013. The credit applies to the following type of facilities; closed loop biomass, open-loop biomass, geothermal energy, municipal solid waste, qualified hydropower marine, and hydrokinetic (waves) energy. The placed in service date for wind energy is extended only until 2012.

Election of Investment Tax Credit Instead of Production Tax Credit 

The new law allows taxpayers to elect the 30% investment tax credit (“ITC”) instead of the production tax credit (“PTC”) for facilities placed in service after Dec. 31, 2008. A taxpayer that elects to take the ITC cannot claim the PTC. Qualified property is depreciable tangible property that is an integral part of the facility but does not include a building or its structural components.

Cap on Small Wind Property Business Energy Credit Is Repealed 

A 2008 law extended the 30% investment tax credit to small wind energy property but limited the credit to $4,000 per year. The new law eliminates the credit cap applicable to qualified small wind energy property. A qualifying small wind turbine is a wind turbine that has a nameplate capacity of not more than 100 kilowatts.

Alternative Fuel Vehicle Refueling Property Credit Increased for 2009 and 2010 

The law currently provides for a credit for the cost of alternative refueling property such as point of delivery storage tanks and pumps. The bill increases the maximum credit available for qualified hydrogen refueling property from $30,000 to $200,000. The bill also increases the maximum credit available for other (non-hydrogen related) qualified refueling property from $30,000 to $50,000. The credit rate also increases from 30% to 50% for non-hydrogen refueling property. For non-business property, the maximum credit is increased from $1,000 to $2,000. The new rules are for tax years beginning after Dec. 31, 2008, and before Jan. 1, 2011.

New Qualified Advanced Energy Manufacturing Project Credit 

The bill establishes a new 30% credit for investment in property used in a qualified advanced energy manufacturing project. A qualified advanced energy manufacturing project is a project that re-equips, expands, or establishes a manufacturing facility for the production of property:

  • Designed to be used to produce energy from the sun, wind, or geothermal deposits;
  • Designed to manufacture fuel cells, microturbines, or an energy storage system for use with electric or hybrid-electric motor vehicles;
  • Designed to manufacture electric grids to support the transmission of intermittent sources of renewable energy, including storage of that energy;
  • Designed to manufacture equipment for use for carbon capture or sequestration;
  • Designed to refine or blend renewable fuels (but not fossil fuels), to produce energy conservation technologies;
  • New qualified plug-in electric drive motor vehicles or components which are designed specifically for use with these vehicles, including electric motors, generators, and power control units; or
  • Other advanced energy property designed to reduce green house gas emissions.

To qualify the property must be depreciable property used in a qualified advanced energy manufacturing project and does not include property designed to manufacture equipment for use in the refining or blending of any transportation fuel other than renewable fuels. Credits are available only for qualified advanced energy manufacturing projects certified by the Secretary of Treasury. Each project application must be submitted during the 2-year period beginning on the date such certification program is established.

Energy Credit Basis Reduction Rule for Subsidized Energy Financing Eliminated 

The bill repeals the rule that requires the reduction in the basis of the property for purposes of computing the 30% ITC on solar, wind, and fuel cell property if the property is financed by subsidized energy financing or with proceeds from private activity bonds.

Clean Renewable Energy Bonds and Energy Conservation Bonds Are Expanded 

The bill authorizes the issuance of up to an additional $1.6 billion of new clean renewable energy bonds (“CREBs”). Under the 2008 law, only $800 million CREBs could be issued. A CREB is a tax-exempt bond used to finance the construction of facilities that qualify for the renewable electricity production tax credit.

Energy Conservation Bonds are another type of tax free bond and must be used for capital expenditures to reduce energy consumption in publicly owned buildings by at least 20%; implement green community programs; rural development involving the production of electricity from renewable energy resources; or generally any facility eligible for the production tax credit. The bill has increased the amount of Energy Conservation Bonds that can be issued from $800 million to 3.2 billion.

2009 American Recovery and Reinvestment Act
    Tax Incentives For Businesses
    Tax Incentives for Individuals and Families
    Tax Provisions Related to Energy
    Other Initiatives

(This information is subject to change, pending the approval of the Senate, House and President) 

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