IRS Regulations

Commercial Buildings

March 2008 IRS Rule on Commercial Building Deduction

In March 2008 the IRS released new rules clarifying several aspects of the commercial building energy efficiency tax deduction. Earlier regulations had spelled out most aspects of how this program works (click here for an overview); these new regulations address a few new issues and clarify several aspects of the old regulations. The new regulations:

Specify the procedures under which owners of government buildings can assign the tax deduction to the primary building designer. Governments are not taxed and hence the tax deduction has no value. Most designers are private entities that are taxed and hence the tax deduction has value to them.
Provide additional details on approved software programs that can be used to demonstrate that energy-saving targets have been met.
Provide for simplified certification procedures for lighting-only improvements under the “interim lighting rule” specified in the earlier regulations.
Revise the energy saving percentages for partially qualifying property. The old rules required 16.67% whole building savings for an envelope system, a HVAC system, or a lighting system to qualify for the partial deduction (link here to the section of our earlier writeup on this). The new rules allow 10% whole building savings for an envelope system to qualify, and 20% whole building savings for a HVAC or lighting system to qualify. In 2008, building owners may use either the 16.67% or 10-20-20% allocation. The IRS has said that if Congress extends the commercial building tax deduction into 2009, only the 10-20-20% allocation can be used at that time.

Previous Guidance

June 2006: the Treasury Department and the Internal Revenue Service (IRS) released a "Guidance Notice" for claiming tax incentives for energy efficient improvements to commercial buildings. This information is summarized on the TIAP Commercial Buildings page.

TIAP is also making available the full text of the new IRS Guidance Notice: Notice 2006-52, Deduction for Energy Efficient Commercial Buildings Please check the TIAP web site for future updates and the latest information on the energy efficiency tax incentives.

Residential Guidance

IRS Notice 2009-53, issued June 1, 2009, provides guidance regarding 'nonbusiness energy property,' superseding previous IRS guidance in light of recent changes to the credits. It also clarifies some regulations related to items eligible for the credit and manufacturers' certification of eligible products. This notice also includes transition rules to provide taxpayers with guidance concerning the interaction of the effective date and timing provisions of the Energy Policy Act, the Energy Improvement and Extension Act, and the American Recovery and Reinvestment Act. The publication of this notice provides specific information that taxpayers and manufacturers can rely upon in claiming the credit or certifying eligible products.

For property placed into service before January 1, 2008, the original IRS guidance applies:

On Tuesday, February 21, 2006 the Treasury Department and the Internal Revenue Service (IRS) released "Guidance Notices" on claiming tax incentives for new energy-efficient home construction and new energy-efficient manufactured housing. Keep in mind that subsequent legislation altered the tax incentives discussed in the original guidance.

These are available for downloading (PDF format) as follows:

Passenger Vehicles

On January 13, 2006, the IRS released a "Guidance Notice" on tax credits for light-duty hybrid and diesel vehicles. To date, the IRS has released notices acknowledging that some Honda, Toyota, Lexus, Ford, Mercury, General Motors, Mazda, Chrysler, Dodge, and Nissan hybrid vehicles have been certified for tax credits (although the Toyota and Honda credits have been phased-out), as have Audi, Mercedes, BMW, and Volkswagen 'lean-burn' diesels. For information on which models are eligible and the amount of credit available, see ACEEE's "Light-Duty Hybrid and Diesel Vehicle Tax Credits in the Energy Bill."

Treasury and IRS tax credit guidance (2006)
IRS information on Qualified Hybrid Vehicles (March 2009)

TIAP is also making available the full text of the IRS Guidance Notices. These are available for download (PDF format):

Notice 2006-9, Credit for New Qualified Alternative Motor Vehicles (Advanced Lean Burn Technology Motor Vehicles and Qualified Hybrid Motor Vehicles)

Please check the TIAP Passenger Vehicle web site for future updates and the latest information on the energy efficiency tax incentives. For more information on specific vehicles and incentive amounts, see ACEEE's "Light-Duty Hybrid and Diesel Vehicle Tax Credits in the Energy Bill."