Federal and State Energy Incentives
Stimulus Package of 2009 Extends, Enlarges Energy Efficiency Tax Incentives
Congress passed an economic stimulus package over the weekend that does much to promote energy efficiency. The American Recover and Reinvestment Tax Act of 2009 includes several provisions modifying and expanding the scope of the energy efficiency and renewable energy incentives. A few notable changes:
- Energy efficiency incentives for upgrades to existing homes have been extended, and are now available for 2009 and 2010.
- Creates a tax credit for qualified plug-in electric drive motor vehicle, ranging from $2,500 to $15,000
- The financial cap for these incentives, which cover home envelope improvements as well as heating, cooling and water heating equipment, was increased to $1,500 (from $500).
- Lower caps, such as the $200 cap on new windows, have been abolished. The existing home incentives are now calculated at 30% of the cost of the installation, up to the $1,500 cap. The legislation is unclear on whether this includes both equipment and labor, however previous IRS rulings suggest that labor is NOT included.
- On-site renewables (solar photovoltaic and hot water systems, small wind systems, and geothermal heat pumps) are now eligible for a tax incentive worth 30% of the total cost, without a cap.
- There are new incentives for plug-in electric vehicles, and plug-in conversion kits.
Listed below are some of the more popular federal incentives relating to alternative fuel tax, hybrid vehicles, and similar incentives. Additionally, the DSIRE database provides a comprehensive source of information on state, local, and utility incentives that promote renewable energy and energy efficiency.
Alternative Fuel Excise Tax Credit
An excise tax credit is available for alternative fuel that is sold for use or used as a fuel to operate a motor vehicle. The credit is $0.50 per gasoline gallon equivalent (GGE) of compressed natural gas and $0.50 per liquid gallon of liquefied petroleum gas, liquefied natural gas, and liquefied hydrogen. The entity eligible for the credit is the one liable for reporting and paying the federal excise tax on the fuel. Eligible entities must be registered with the Internal Revenue Service (IRS). Tax exempt entities that fuel vehicles from an on-site fueling station can claim the excise tax credit and receive a direct payment from the IRS. The following forms may be used to claim the excise tax credit: Form 720 (PDF 442 KB); Form 8849, Schedule 3 (PDF 189 KB); and/or Form 4136 (PDF 263 KB). The credit is available until December 31, 2009, except in the case of the credit for liquefied hydrogen, which expires September 30, 2014. For more information see Publication 510 (PDF 1 MB) and IRS Notice 2006-92 (PDF 29 KB). (Reference House Resolution 1424, 2008, and 26 U.S. Code 6427) Download Adobe Reader
Point of Contact
U.S. Internal Revenue Service
Phone (800) 829-1040
IRS Website
Alternative Fuel Tax Exemption
Alternative fuels used in a manner that the Internal Revenue Service (IRS) deems as nontaxable are exempt from federal fuel taxes. Common nontaxable uses in a motor vehicle are: on a farm for farming purposes; in certain intercity and local buses; in a school bus; exclusive use by a nonprofit educational organization; and exclusive use by a state, political subdivision of a state, or the District of Columbia. This exemption is not available to tax exempt entities that are not liable for excise taxes on transportation fuel. For more information, see IRS Publication 510 (PDF 1 MB). Download Adobe Reader
Point of Contact
U.S. Internal Revenue Service
Phone (800) 829-1040
Alternative Fuel Infrastructure Tax Credit
A tax credit is available for up to 30% of the cost of installing alternative fueling equipment, not to exceed $30,000. Qualifying alternative fuels are natural gas, liquefied petroleum gas, hydrogen, electricity, E85, or diesel fuel blends containing a minimum of 20% biodiesel. Fueling station owners who install qualified equipment at multiple sites are allowed to use the credit towards each location. Consumers who purchase residential fueling equipment may receive a tax credit of $1,000. The credit is effective for equipment put into service after December 31, 2005, and before December 31, 2010; the credit for hydrogen fueling property expires December 31, 2014. Form 8911 (PDF 247 KB) provides additional information and must be used in order to claim the tax credit. (Reference House Resolution 1424, 2008, and 26 U.S. Code 30C) Download Adobe Reader
Point of Contact
U.S. Internal Revenue Service
Phone (800) 829-1040
IRS Website
Fuel Cell Motor Vehicle Tax Credit
A tax credit of up to $8,000 is available for the purchase of qualified light-duty fuel cell vehicles. After December 31, 2009, the credit is reduced to $4,000. Tax credits are also available for medium- and heavy-duty fuel cell vehicles; credit amounts are based on vehicle weight. Vehicle manufacturers must follow the procedures as published in Notice 2008-33 (PDF 30KB) in order to certify to the Internal Revenue Service that a vehicle meets certain requirements to claim the fuel cell vehicle credit. Notice 2008-33 also provides guidance to taxpayers about claiming the credit. Form 8910 (PDF 267 KB) provides additional information and must be used to claim the tax credit. This tax credit expires on December 31, 2014. (Reference 26 U.S. Code 30B) Download Adobe Reader
Point of Contact
U.S. Internal Revenue Service
Phone (800) 829-1040
IRS Website
Heavy-Duty Hybrid Electric Vehicle (HEV) Tax Credit
A tax credit of up to $18,000 is available for the purchase of qualified heavy-duty HEVs with a gross vehicle weight rating of more than 8,500 pounds. Vehicle manufacturers must follow the procedures published in Notice 2007-23 to certify to the Internal Revenue Service (IRS) that a heavy-duty vehicle meets the requirements to claim the heavy-duty HEV credit and confirm the amount of the allowable credit with respect to that vehicle. See the IRS Heavy Hybrid Vehicles Web site for the current list of qualified vehicles and credits. This tax credit expires December 31, 2009. (Reference 26 U.S. Code 30B)
Point of Contact
U.S. Internal Revenue Service
Phone (800) 829-1040
IRS Website
Idle Reduction Equipment Excise Tax Exemption
Qualified on-board idle reduction devices and systems are exempt from the 12% retail excise tax imposed on heavy-duty trucks and trailers. For a list of eligible products and additional information about product exemption eligibility criteria, see the U.S. Environmental Protection Agency’s SmartWay Transport Idle Reduction Website. Only equipment sold after October 3, 2008, is eligible. (Reference Public Law 110-343, Section 206, and 26 U.S. Code 4053)
Point of Contact
U.S. Internal Revenue Service
Phone (800) 829-1040
IRS Website
Improved Energy Technology Loans
The U.S. Department of Energy (DOE) provides loan guarantees through the Loan Guarantee Program (Program) to eligible projects that reduce air pollution and greenhouse gases, and support early commercial use of advanced technologies, including biofuels and alternative fuel vehicles. The Program is not intended for research and development projects. DOE may issue loan guarantees for up to 100% of the amount of the loan for an eligible project. For loan guarantees of over 80%, the loan must be issued and funded by the Treasury Department’s Federal Financing Bank. For additional Program guidelines and solicitation announcements, please visit the Loan Guarantee Program Web site. (Reference 42 U.S. Code 16513)
Point of Contact
U.S. Department of Energy
Phone (800) 342-5363
Fax (202) 586-4403
U.S. Energy Department website
Light-Duty Hybrid Electric Vehicle (HEV) and Advanced Lean Burn Vehicle Tax Credit
A tax credit is available for qualified light-duty HEVs and advanced lean burn technology vehicles placed in service after December 31, 2005. The Internal Revenue Service (IRS) must first acknowledge the manufacturers’ certifications of qualified vehicles and credit amounts, which are determined using a formula that accounts for improved fuel economy and lifetime fuel savings potential. The credit begins to phase out in the second quarter following the calendar quarter in which at least 60,000 of a manufacturer’s qualifying HEVs and/or lean burn passenger automobiles and light trucks have been sold. See the IRS Hybrid Cars and Advanced Lean Burn Technology Vehicles Web site for the current list of qualified vehicles, credits, phase-out schedules, and required forms. This tax credit expires December 31, 2010. (Reference 26 U.S. Code 30B)
Point of Contact
U.S. Internal Revenue Service
Phone (800) 829-1040
IRS Website
Qualified Alternative Fuel Motor Vehicle (QAFMV) Tax Credit
A tax credit is available toward the purchase of QAFMVs, which may be either new, original equipment manufacturer vehicles or vehicles that have been repowered by an aftermarket conversion company to operate on an alternative fuel. Qualifying alternative fuels are those powered by natural gas, liquefied petroleum gas, hydrogen, and fuel containing at least 85% methanol. The vehicle must be placed in service as an alternative fuel vehicle on or after January 1, 2006. Vehicle manufacturers must follow the procedures as published in Notice 2006-54 in order to certify to the Internal Revenue Service (IRS) that a vehicle meets the requirements to claim the QAFMV credit and confirm the allowable credit with respect to that vehicle. See the IRS QAFMV Web site for the current list of qualified vehicles and credits. Form 8910 (PDF 267 KB) provides additional information and must be used to claim the tax credit. This tax credit expires December 31, 2010. (Reference 26 U.S. Code 30B) Download Adobe Reader
Point of Contact
U.S. Internal Revenue Service
Phone (800) 829-1040
IRS Website
Qualified Plug-In Electric Drive Motor Vehicle Tax Credit
A tax credit is available for the purchase of a new qualified plug-in electric drive motor vehicle that draws propulsion using a traction battery that has at least four kilowatt hours of capacity, uses an off-board source of energy to recharge the battery, and meets specified emission standards. The minimum credit amount is $2,500, and the credit may be up to $15,000, based on each vehicle’s traction battery capacity and the gross vehicle weight rating. The credit will begin to be phased out in the second quarter following the calendar quarter in which a minimum of 250,000 qualified plug-in electric drive vehicles have been sold for use in the U.S. This tax credit expires December 31, 2014. (Reference House Resolution 1424, 2008, and 26 U.S. Code 30D)
Point of Contact
U.S. Internal Revenue Service
Phone (800) 829-1040
IRS Website
Value-Added Producer Grants (VAPG)
The U.S. Department of Agriculture Office of Rural Development awards Value-Added Producer Grants for planning activities and working capital for marketing value-added agricultural products and farm-based renewable energy. Eligible applicants include independent producers, farmer and rancher cooperatives, agricultural producer groups, and majority-controlled producer-based business ventures. Eligible participants may apply for either a planning grant or a working capital grant, but not both. In addition, no more than 10% of program funds may be awarded to majority-controlled producer-based business ventures. Grants will only be awarded if projects are determined to be economically viable and sustainable. For more information about grant eligibility, visit the VAPG Web site and contact the appropriate State Rural Development Office. (Reference 7 U.S. Code 1621)
Point of Contact
Office of Rural Development
U.S. Department of Agriculture
Phone (202) 690-4730
The USDA Energy Initiatives website