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The Senate Finance Committee is improving the 25C tax credit

by Coby

The Senate Finance Committee voted on a package of "tax extenders" today, including the 25C and 179D credits that are of particular interest to building performance companies. The 25C credit makes it easier for customers to afford energy efficient upgrades in their homes by providing a credit for certain energy efficient products and equipment. 179D provides a credit for high performing new homes.

Summary

The package of tax extenders that passed in the Senate Finance Committee today includes two changes that Efficiency First has worked hard to advocate for:

  • It proposes extending the 25C and 179D credits through the end of 2016 (not just through this year)
  • It proposes adding installation costs as eligible for the 25C credit (and updates some equipment efficiency requirements)

About the "Extenders" Package

These are tax credits, deductions, etc, that either expired at the end of last year or are due to expire at the end of this year. The entire legislative package spans a variety of different issues and areas of our economy. Among the extenders in the package are a number of energy-related items, including several tax credits related to clean energy and energy efficiency like 25C and 179D.

Last December, Congress extended the credits retroactively to cover 2014 -- but didn't extend them into 2015, meaning that companies only had a couple of weeks to offer customers the credits before the expired. Both the 25C and 179D credits expired after December 31, 2014.

The Senate Finance Committee's Proposal

Today the Senate Finance Committee approved, 23-3, a modified "Chairman's mark," which is Chairman Hatch's proposal addressing all the extenders. View the modifications and the original description.

The bill includes provisions to extend BOTH the 25C and 179D tax credits until the end of 2016. Efficiency First has advocated with our allies for extensions that aren't just retroactive. This is a good step in the right direction.

The proposed 25C extension would allow installation costs to be included as an eligible expense, which Efficiency First has long advocated for. It would also allow qualifying property to include all roof and roof products that meet Energy Star program guidelines, and would modify certain product and equipment efficiency standards. These modifications include:

  • Windows, skylights, and doors must meet Energy Star version 6.0 standards.
  • Natural gas, propane, or oil storage water heaters must have an energy factor of at least 0.8 or a thermal efficiency of at least 90 percent.
  • Storage water heaters must have storage capacity of greater than 20 gallons but less than or equal to 55 gallons to claim the credit.
  • Biomass fuel stoves must have thermal efficiency of 75 percent evaluated at the higher heating value and tested in accordance with Canadian Standards Association Standard B415.1.
  • Oil hot water boilers must have an annual fuel utilization efficiency not less than 90.

Tax credit levels would be the same as the 2014 levels, which you can find here.

These proposals are still a ways away from passage, and discussions will likely continue as the Senate prepares for floor action. Extenders will ultimately be considered in the context of 2016 budget negotiations between Congress and the Administration, and may end up getting attached to “must-pass” legislation, like the highway funding bill. As the legislation moves forward in the Senate and works its way into budget debates, we'll be supporting the extensions through 2016, as well as the inclusion of installation costs eligibility and updated product and equipment standards. We'll also be working on other kinds of legislation, including tax-related proposals, that would help people upgrade their homes and foster growth in the building performance sector.

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