Internal Revenue Code:Sec. 25C. Nonbusiness Energy Property
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Location in Internal Revenue Code
TITLE 26 - INTERNAL REVENUE CODE
Subtitle A - Income Taxes
CHAPTER 1 - NORMAL TAXES AND SURTAXES
Subchapter A - Determination of Tax Liability
PART IV - CREDIT AGAINST TAXES
Subpart A - Nonrefundable Personal Credits
Statute
SEC. 25C. NONBUSINESS ENERGY PROPERTY.
(a) Allowance of Credit- In the case of an individual, there
shall be allowed as a credit against the tax imposed by this
chapter for the taxable year an amount equal to the sum of--
(1) 10 percent of the amount paid or incurred by the taxpayer
for qualified energy efficiency improvements installed during
such taxable year, and
(2) the amount of the residential energy property expenditures
paid or incurred by the taxpayer during such taxable year.
(b) Limitations-
(1) LIFETIME LIMITATION- The credit allowed under this section
with respect to any taxpayer for any taxable year shall not
exceed the excess (if any) of $500 over the aggregate credits
allowed under this section with respect to such taxpayer for
all prior taxable years.
(2) WINDOWS- In the case of amounts paid or incurred for
components described in subsection (c)
(2)(B) by any taxpayer for any taxable year, the credit allowed
under this section with respect to such amounts for such year
shall not exceed the excess (if any) of $200 over the aggregate
credits allowed under this section with respect to such amounts
for all prior taxable years.
(3) LIMITATION ON RESIDENTIAL ENERGY PROPERTY EXPENDITURES- The
amount of the credit allowed under this section by reason of
subsection (a)(2) shall not exceed--
(A) $50 for any advanced main air circulating fan,
(B) $150 for any qualified natural gas, propane, or oil furnace
or hot water boiler, and
(C) $300 for any item of energy-efficient building property.
(c) Qualified Energy Efficiency Improvements- For purposes of this
section--
(1) IN GENERAL- The term `qualified energy efficiency improvements'
means any energy efficient building envelope component which
meets the prescriptive criteria for such component established
by the 2000 International Energy Conservation Code, as such Code
(including supplements) is in effect on the date of the enactment
of this section (or, in the case of a metal roof with appropriate
pigmented coatings which meet the Energy Star program requirements),
if--
(A) such component is installed in or on a dwelling unit located
in the United States and owned and used by the taxpayer as the
taxpayer's principal residence (within the meaning of section 121),
(B) the original use of such component commences with the taxpayer, and
(C) such component reasonably can be expected to remain in use for
at least 5 years.
(2) BUILDING ENVELOPE COMPONENT- The term `building envelope component'
means--
(A) any insulation material or system which is specifically and
primarily designed to reduce the heat loss or gain of a dwelling
unit when installed in or on such dwelling unit,
(B) exterior windows (including skylights),
(C) exterior doors, and
(D) any metal roof installed on a dwelling unit, but only if
such roof has appropriate pigmented coatings which are
specifically and primarily designed to reduce the heat gain of
such dwelling unit.
(3) MANUFACTURED HOMES INCLUDED- The term `dwelling unit' includes
a manufactured home which conforms to Federal Manufactured Home
Construction and Safety Standards (section 3280 of title 24,
Code of Federal Regulations).
(d) Residential Energy Property Expenditures- For purposes of
this section--
(1) IN GENERAL- The term `residential energy property expenditures'
means expenditures made by the taxpayer for qualified energy
property which is--
(A) installed on or in connection with a dwelling unit located
in the United States and owned and used by the taxpayer as
the taxpayer's principal residence (within the meaning of
section 121), and
(B) originally placed in service by the taxpayer.
Such term includes expenditures for labor costs properly allocable
to the onsite preparation, assembly, or original installation of
the property.
(2) QUALIFIED ENERGY PROPERTY-
(A) IN GENERAL- The term `qualified energy property' means--
(i) energy-efficient building property,
(ii) a qualified natural gas, propane, or oil furnace or hot
water boiler, or
(iii) an advanced main air circulating fan.
(B) PERFORMANCE AND QUALITY STANDARDS- Property described
under subparagraph (A) shall meet the performance and
quality standards, and the certification requirements
(if any), which--
(i) have been prescribed by the Secretary by regulations
(after consultation with the Secretary of Energy or
the Administrator of the Environmental Protection Agency,
as appropriate), and
(ii) are in effect at the time of the acquisition of
the property, or at the time of the completion of the
construction, reconstruction, or erection of the property,
as the case may be.
(C) REQUIREMENTS FOR STANDARDS- The standards and requirements
prescribed by the Secretary under subparagraph (B)--
(i) in the case of the energy efficiency ratio (EER) for
central air conditioners and electric heat pumps--
(I) shall require measurements to be based on published
data which is tested by manufacturers at 95 degrees
Fahrenheit, and
(II) may be based on the certified data of the Air
Conditioning and Refrigeration Institute that are
prepared in partnership with the Consortium for Energy
Efficiency, and
(ii) in the case of geothermal heat pumps--
(I) shall be based on testing under the conditions
of ARI/ISO Standard 13256-1 for Water
Source Heat Pumps or ARI 870 for Direct Expansion
GeoExchange Heat Pumps (DX), as appropriate, and
(II) shall include evidence that water heating services
have been provided through a desuperheater or integrated
water heating system connected to the storage water
heater tank.
(3) ENERGY-EFFICIENT BUILDING PROPERTY- The term `energy-efficient
building property' means--
(A) an electric heat pump water heater which yields an energy
factor of at least 2.0 in the standard Department of Energy
test procedure,
(B) an electric heat pump which has a heating seasonal
performance factor (HSPF) of at least 9, a seasonal energy
efficiency ratio (SEER) of at least 15, and an energy
efficiency ratio (EER) of at least 13,
(C) a geothermal heat pump which--
(i) in the case of a closed loop product, has an energy
efficiency ratio (EER) of at least 14.1 and a heating
coefficient of performance (COP) of at least 3.3,
(ii) in the case of an open loop product, has an energy
efficiency ratio (EER) of at least 16.2 and a heating
coefficient of performance (COP) of at least 3.6, and
(iii) in the case of a direct expansion (DX) product, has
an energy efficiency ratio (EER) of at least 15 and a
heating coefficient of performance (COP) of at least 3.5,
(D) a central air conditioner which achieves the highest
efficiency tier established by the Consortium for Energy
Efficiency, as in effect on January 1, 2006, and
(E) a natural gas, propane, or oil water heater which has an
energy factor of at least 0.80.
(4) QUALIFIED NATURAL GAS, PROPANE, OR OIL FURNACE OR HOT WATER
BOILER- The term `qualified
natural gas, propane, or oil furnace or hot water boiler'
means a natural gas, propane, or oil furnace or hot water
boiler which achieves an annual fuel utilization efficiency
rate of not less than 95.
(5) ADVANCED MAIN AIR CIRCULATING FAN- The term `advanced main
air circulating fan' means a fan used in a natural gas,
propane, or oil furnace and which has an annual electricity
use of no more than 2 percent of the total annual energy use
of the furnace (as determined in the standard Department of
Energy test procedures).
(e) Special Rules- For purposes of this section--
(1) APPLICATION OF RULES- Rules similar to the rules under
paragraphs (4), (5), (6), (7), (8) and (9) of section 25D(e)
shall apply.
(2) JOINT OWNERSHIP OF ENERGY ITEMS-
(A) IN GENERAL- Any expenditure otherwise qualifying as
an expenditure under this section shall not be treated
as failing to so qualify merely because such expenditure
was made with respect to two or more dwelling units.
(B) LIMITS APPLIED SEPARATELY- In the case of any expenditure
described in subparagraph
(A), the amount of the credit allowable under subsection
(a) shall (subject to paragraph
(1)) be computed separately with respect to the amount
of the expenditure made for each dwelling unit.
(f) Basis Adjustments- For purposes of this subtitle, if a credit
is allowed under this section for any expenditure with respect
to any property, the increase in the basis of such property
which would (but for this subsection) result from such
expenditure shall be reduced by the amount of the credit so allowed.
(g) Termination- This section shall not apply with respect to any
property placed in service after December 31, 2007.
Sources
Energy Policy Act 2005, Sec. 1333(a), established new IRC Sec. 25C. Effective
Dates- The amendments made by this section shall apply to property placed in
service after December 31, 2005.
