Other Green Incentives for Business

In my last blog post I covered IRC Sec. 179D and the deduction for energy efficient commercial buildings.

Today, I'm going to highlight some of the other energy and efficiency related incentives that you might want to know about. Due to the complexity and the narrow applicability of many of these tax incentives, I'm just going to list them out today and I'll decide later whether to delve deeper into any of them.

1. Accelerated Depreciation for Qualified Smart Electric Meter and Qualified Smart Electric Grid System (IRC Sec. 168(e)(3)(D)(iii) and (iv));
2. Qualifying Advanced Energy Project Credit (IRC Sec. 48C);
3. Energy Efficient Appliance Credit (IRC Sec. 45M);
4. Credit for Carbon Dioxide Sequestration (IRC Sec. 45Q);
5. Qualifying Advanced Coal Project Credit (IRC Sec. 48A);
6. Qualifying Gasification Project Credit (IRC Sec. 48B);
7. Alcohol Fuels Credit (IRC Sec. 40);
8. Enhanced Oil Recovery Credit (IRC Sec. 43);
9. Renewable Electricity Production Credit (IRC Sec. 45);
10. Biodiesel Fuels Credit (IRC Sec. 40A);
11. Low Sulfur Diesel Fuel Production Credit (IRC Sec. 45H)
12. Advanced Nuclear Power Facility Production Credit (IRC Sec. 45J); and
13. Nonconventional Source Production Credit (IRC Sec. 45K).

Green Tax Incentives for Travel (Part II)

In Part I of this post I focused on "Green" tax incentives related to travel/transportation, primarily for the individual. As mentioned in that blog post, the following tax credits are available for both individuals and businesses:

• New Qualified Plug-in Electric Drive Motor Vehicles Credit (IRC Sec.30D)
• Certain Plug-in Electric Vehicles Credit (IRC Sec. 30)
• Alternative Motor Vehicle Credit (IRC Sec. 30B)

The calculation of the credits, certification requirements, and all of the rules are the same for business as individuals with a few exceptions.

First, there is no rule allowing the business portion of any of the credits to apply against individual AMT. Second, business credits carry forward if unused while individual credits fall into the "use them or lose them" category.

Two additional "green" incentives for business are related to fringe benefits for employee commuting:

1. Transit and Vanpool Transportation Fringe Benefits (IRC Sec. 132(f)(2))
2. Bicycle Commuters Fringe Benefit (IRC Sec. 132(f))

Under the tax law, an employee may exclude qualified transportation fringe benefits from gross income and wages for payroll tax purposes while the employer is ably to fully deduct these fringe benefits as ordinary and necessary business expenses. The transportation fringes include parking, transit passes, vanpool benefits, and qualified bicycle commuting reimbursements.

Prior to 2009, up to $230 per month of parking benefits and up to $120 per month of transit and vanpool benefits were excludable from income. The Recovery Act (ARRA) increased the monthly exclusion for vanpool and transit benefits to the same $230 per month available for parking benefits.

The Bicycle Commuters Fringe Benefit allows an employer to reimburse a bike commuter up to $20 per month for reasonable expenses incurred by the employee during the calendar year for the purchase, improvements, repair, and storage of a bicycle that is used regularly for a substantial portion of the commute between an employees home and workplace.

Employees are not allowed to exclude from income the bicycle commuting fringe benefit for any month that another transportation benefit is received by the employee. Employers have until March 31 to reimburse employees for expenses incurred int he prior calendar year. Accordingly, you could still provide this tax advantaged fringe benefit to your 2009 bike commuters.

Green Tax Incentives for Travel (Part I)

I covered federal tax incentives for going green in the home here and here. Now I'm going to cover green tax incentives associated with travel.

For individuals, the following credits are available:

• New Qualified Plug-in Electric Drive Motor Vehicles Credit (IRC Sec. 30D)
• Certain Plug-in Electric Vehicles Credit (IRC Sec. 30)
• Alternative Motor Vehicle Credit (IRC Sec. 30B)
• New Qualified Fuel Cell Motor Vehicle Credit (IRC Sec. 30B)
• New Qualified Advanced Lean burn Technology Motor Vehicle Credit (IRC Sec. 30B)
• New Qualified Hybrid Motor Vehicle Credit (IRC Sec. 30B)
• New Qualified Alternative Fuel Motor Vehicle Credit (IRC Sec. 30B)
• Plug-in Conversion Credit (IRC Sec. 30B)

The first three items on the list are also available for businesses that purchase energy efficient vehicles.

The rules for each of these credits is too detailed to blog about but you can find out more by reviewing the code sections or looking at the required forms where the various credits are calculated - Form 8936 (Qualified Plug-in Electric Drive Motor Vehicle Credit), Form 8834 (Qualified Plug-in Electric and Electric Vehicle Credit), and Form 8910 (Alternative Motor Vehicle Credit).

Green Tax Incentives for the Home (Part II)

In Part I we covered the Non-business Energy Homeowner Credit provided in IRC Sec. 25C. In this post we'll cover the Residential Energy Efficient Property Credit provided in IRC Sec. 25D.

Like the IRC Sec. 25C Credit, this is available to individual taxpayers and is based on the cost of energy efficiency improvements made to their United States residence. The nonrefundable credit is for 30% of certain expenditures. With one exception however, the expenditures under 25D need not be made to a principle residence, making the credit available on multiple residences located in the United States.

It should be noted that 25D credits can offset both regular and AMT tax. Any credit allowed under 25D reduces the basis of the property by the amount of the credit.

In general, this tax credit covers:

• Qualified solar electric property expenditures;
• Qualified solar water heating property expenditures;
• Qualified fuel cell property expenditures;
• Qualified small wind energy property expenditures;
• Qualified geothermal heat pump property expenditures;

It should be noted that many of these credits had limits between $500 and $2,000 prior to 2009. A number of new laws eliminated the limits on everything but the fuel cell property for the years 2009 through 2016.

Labor costs to prepare, assemble and install the property is included in the credit calculation. Expenditures to heat a swimming pool or hot tub are not allowed.

Taxpayers should get documentation from the manufacturer to claim the credit. The credit can be claimed by properly completing Form 5695 (Residential Energy Credits) and attaching it to the taxpayer's Form 1040.

Green Tax Incentives for the Home (Part I)

There are federal tax credits to help you green your home. IRC Sec. 25C and IRC Sec. 25D provide for the federal credits. I'll cover IRC Sec. 25C in this post and IRC Sec. 25D in the next post.

IRC Sec. 25C provides Non-business Homeowners Energy Credits of 30 percent up to $1,500 aggregate cap. This credit is for expenditures made in 2009 and 2010. It is set to expire at the end of this year. IRC Sec. 25C is for improvements to a principle residence.

The credit is for:

• Qualified energy efficiency improvements, and
• Residential energy property expenditures

"Qualified energy efficiency improvements" is mostly about improvements to the building envelope. Windows, skylights, roofs, insulation, and doors would all qualify if they meet the appropriate performance standards.

"Residential energy property expenditures" is where you get your credit for furnaces, boilers, heat pumps, air conditioners, hot water heaters, fans, and the like. This equipment must meet performance and quality standards to qualify.

The IRS issued Notice 2009-53 to provide interim guidance on the credit. One thing to note is that the IRS cautioned that Energy Star certification doesn't establish that a product is qualified for credit, especially with regards to exterior windows and skylights placed in service after enactment of the American Recovery and Reinvestment Act of 2009.

Taxpayers should make sure they receive proper certification from the manufacturer for property on which they plan to take the credit.

Going Green using the Tax Law

I'm often asked about tax and other governmental incentives for going green, so thought I'd give a high level overview. It would probably take a book to cover all the federal, state and local incentives that might be available so I'll just be covering the federal tax incentives.

I've worked with clients who got part of their funding to "go green" through federal programs like USDA REAP Grants, which are available for rural development. I do not know where one would find a comprehensive list of all the available programs that might fund your green project.

On a local level however, you should always check the Database for State Incentives for Renewables & Efficiency to see what local incentives are available.

For the CPAs and attorneys who might be interested, there are three main federal Acts which provide tax incentives for businesses and individuals:

1. The American Recovery and Reinvestment Act of 2009 (ARRA)
2. Emergency Economic Stabilization Act of 2008 (EESA)
3. The Energy Policy Act of 2005

Check back and I'll cover the incentives in the next few posts.