BEST ENERGY TAX CREDITS

Top 4 Energy Tax Credits For Investors
Nellie Day, June 1, 2009 (NuWire Investor)

SUMMARY
The American Recovery and Reinvestment Act (ARRA), passed in February, contains a spectrum of tax incentives, rebates and refunds, including $94 million in grants, incentives and loans for New Energy projects and companies as well as $16.5 billion in New Energy federal tax incentives, $4 billion in Clean Renewable Energy and Energy Conservation bonds and nearly $26 billion for Energy Efficiency projects.

These benefits were added on to or were extensions of pre-existing incentives and subsidies to New Energy and Energy Efficiency. Programs run the gamut of sizes, from neighborhood scale to federal scale.

Professionals are just beginning to thoroughly find their way through the Act’s density and understand the new benefits and how they extend, compliment or supercede existing benefits.

click thru to Recovery.gov (click to enlarge)

Clay Crownover, a policy specialist with the widely respected Alliance to Save Energy, stressed the importance of enduring the bureaucratic maze to find the support ARRA provides to small business owners and homeowners for Energy Efficiency improvements. Efficiencies are crucial because they make homes better values and more affordable and they make small businesses more competitive. Ultimately, he said, the ARRA benefits will make it more affordable for homes and businesses to reap the rewards of being Energy Efficient, an especially invaluable edge in recessionary times.

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NuWire Investor, a website specializing in research and analysis on news and trends in alternative investing in areas like real estate, franchises, commodities and peer-to-peer lending, assessed the many provisions in ARRA and picked 4 areas of opportunity:

(1) Home Improvements: A tax credit of up to $1,500 plus credit for 30% of energy savings is provided for home efficiency upgrades. Skylights, storm windows, weather stripping, caulking, foam sealants, new air conditioners, furnaces and water heaters are included. Available thru December 31, 2010. Submit receipts, manufacturer’s warranties and IRS Form 5695 with taxes.

(2) Tax Deductions for Commercial Buildings: New buildings or retrofits that cut heating and cooling 50%, including with interior lighting, ventilation and hot water systems, earn 30 cents-to-$1.80 per square foot back. Improvements must meet American Society of Heating, Refrigerating and Air-Conditioning Engineers (ASHRAE) standards. Projects must be completed before December 31, 2013. Obtain certification according to IRS Notice 2006-52.

(3) Business Energy Investment Tax Credit (ITC): A tax reduction of 30% of total expenditure is available to business owners that install and use solar systems, hybrid lighting systems, fuel cells, and small wind turbines. The tax credit is 10% of expenditure for geothermal systems. No expiration date. File IRS Form 3468 with taxes.

(4) Residential Energy Conservation Subsidy Exclusion: Subsidies are available from utilities for installation in single-family and multi-family homes, condos, apartments, boats and mobile homes of New Energy systems. They may be in the form of a refund or a discount. They are non-taxable. See IRS Publication 525 for further guidelines

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COMMENTARY
A considerable industry of books, lectures, seminars and reference tools is emerging just to guide the many potential users of ARRA benefits through the maze of possibilities. The bureaucratic complexity of ARRA, it would seem, is something of a boost for the economy in and of itself.

One of the reasons the stimulus program funded by ARRA has been slow to have an impact is that it takes time for the federal bureaucracy to set up application-processing mechanics. It must also establish uniform application standards and approval policies.

Another thing slowing enactment of stimulus programs down is that it takes time for information like the NuWire assessment to find its way to consumers, for consumers to decide what programs to apply for and to figure out how to apply for them.

It is anticipated that bureaucratic readiness will be complete during the summer, Applications should be completed and submitted by the fall, funds will likely start flowing by the end of the year and the recovery is expected to get stronger as 2010 progresses.

Click thru to Recovery.gov (click to enlarge)

There are several websites with complete and current information:

(1) A complete list of incentives is available by industry, state or product at the Database of State Incentives for Renewables & Efficiency (DSIRE).

(2) The Alliance to Save Energy maintains and updates incentive information.

(3) The Tax Incentive Assistance Project is regularly updated.

(4) The federal government’s Energy Star program also provides information on existing and new opportunities.

Or contact a knowledgeable tax consultant.

Click thru to Recovery.gov (click to enlarge)

QUOTES
- Clay Crownover, policy manager, Alliance to Save Energy: “Investing in energy efficiency is investing in your business…By investing in energy efficiency, you are freeing up capital through energy cost savings that you ultimately can put back into your business, reducing your operating costs and probably giving you the ability to hire more people.”
- Crownover: “Up-front costs and cash flow problems can sometimes be a problem with the small business owner…[But] the savings generated over time make it a worthwhile investment.”