Economic Bailout Boosts HVAC Incentives

October 27, 2008
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The Emergency Economic Stabilization Act of 2008 (EESA) passed the U.S. House of Representatives and within hours was signed into law by President George W. Bush. Providing for the $700 billion governmental bailout of several failing bank assets, the new law also contained extensions to both current and expired HVAC tax incentives. The American Society of Heating, Refrigerating and Air-Conditioning Engineers (ASHRAE) commended Congress on including the incentive extensions in its economic bailout.

“Though several attempts were made during the 110th Congress to extend these credits and incentives, those attempts failed due to disagreement over funding issues,” said Bill Harrison, ASHRAE president. “These credits are essential for the energy independence of our nation.”

One of the significant extensions was the time frame on the Commercial Building Tax Deduction (CBTD) to 2013. For five years, building owners are allowed to claim a deduction of up to $1.80 per square foot for HVAC, lighting, or envelope upgrades resulting in 50 percent savings over ANSI/ASHRAE/IESNA Standard 90.1-2001.

“This extension provides a more realistic time period for building owners to take advantage of the incentive,” said Stephen Yurek, president of the Air-Conditioning, Heating, and Refrigeration Institute (AHRI). “It takes, on average, five years from commissioning to completion of a new building, but the deduction, which was included in the Energy Policy Act of 2005, only gave building owners two years to take advantage of it, severely limiting the value of the incentive.”

Other incentive extensions included:

• The credit for energy-efficient improvements to existing homes for 2009. This includes biomass fuel stoves (maximum of $300 credit), and clarifies the efficiency standard for water heaters.

• The manufacturers’ EE appliance tax credits through 2010 for appliances that are U.S.-produced - 3-year extension.

• The credit for energy-efficient improvements in new homes through 2009 - 1 year extension - that achieve a 30 or 50 percent reduction in heating and cooling energy consumption relative to a comparable dwelling. The credit equals $1,000 for homes meeting a 30 percent efficiency standard and $2,000 for homes meeting a 50 percent standard.

• The Renewable Energy Production credit for wind to 2010; biomass, geothermal, solar, and hydro to 2011; and added a marine/tidal credit through 2012.

• The credits for solar energy property, fuel cell property, and microturbines through 2016.

• Residential tax credits for energy-saving appliances, energy-efficient homes, and onsite renewables.

“Incentives work because they offset the initial purchase cost, while paving the way to greater energy savings down the road, which is good for consumers, the economy, and the environment,” said Yurek.

UNCLOGGING FINANCES

The law also extended several programs and established some new ones. The program providing tax-exempt bond designation to designated green building and sustainable design projects on brownfields was extended, along with the expired business research credit.

Provisions were established for Energy Conservation Bonds issued by states or localities to conduct energy conservation projects, and an accelerated depreciation period for smart meters and smart grid systems were added.

According to the Air Conditioning Contractors of America (ACCA), this legislation will allow the U.S. Treasury to unclog the financial system by clearing the most toxic assets being held by banks and other lending institutions.

“As a result, more funds will be available for lending to small businesses that need to make payrolls, purchase inventory, and address short-term emergencies,” said the association.

“By passing this important piece of legislation, Congress is encouraging growth of renewable energy and the small businesses across the country that support it,” said Phil Albertson, international vice president of sales and marketing for WaterFurnace International Inc., Fort Wayne, Ind.

According to WaterFurnace, the legislation offers a one-time tax credit of 30 percent of the total investment for residential ground loop or ground water geothermal heat pump installations, with a maximum credit of $2,000 for a single residence. The legislation also provides a credit of 10 percent of the total investment, with no maximum credit, for commercial system installations.

ASHRAE’s Harrison further lauded the economic bailout legislation and its emphasis on supporting energy efficiency economically. “While the banking industry may be visibly suffering now due to these economic times, we will all suffer if we don’t find ways to take advantage of alternative energy sources and make our buildings more efficient,” he said.

Publication date: 10/27/2008

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Extension of Tax Credits

Michele - AIR MASTERS HEATING & AC CO - Centreville, VA
October 27, 2008
Could you possibly let me know the HR# this applies to? I had been citing the Enery Policy Act of 2005(which of course expired at the end of 2007)as incentive to my customers to buy-up into more efficient replacement HVAC systems in their homes. Do the extensions you reference in the article apply to the same Act? Is there a government web site I can view to the information I seek? Thanks for any light you can shed on this.

More information on tax credits

Greg Mazurkiewicz
October 28, 2008
The Emergency Economic Stabilization Act of 2008 is H.R. 1424. The legislation extended many of the energy efficiency tax incentives that were first enacted in 2005 but expired at the end of 2007 or were scheduled to expire at the end of 2008. You can find the complete contents of H.R. 1424 at the Library of Congress website at: http://thomas.loc.gov/cgi-bin/query/z?c110:H.R.1424.enr:

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