Energy Improvement and Extension Act of 2008
Act §305 – Modifications of Energy Efficient Appliance Credit for Appliances Produced After 2007
In General
The Energy Improvement and Extension Act of 2008 modifies and extends the manufacturer’s tax credit for the production of certain energy efficient dishwashers, clothes washers and refrigerators in calendar years 2008, 2009, and 2010. The credit, pursuant to Code §45M, is claimed by a manufacturer for each type of qualified energy efficient appliance produced by the taxpayer during the calendar year ending with or within the taxpayer’s taxable year as part of the general business credit under Code §38. I.R.C. §45M(a)(1).
Credit Amount Per Unit Produced
The amount of the credit per unit produced varies based upon the type of energy efficient appliance produced.
Dishwashers
The credit amount for a dishwasher that is manufactured in calendar year 2008 or 2009 and that uses no more that 324 kilowatt hours per year and 5.8 gallons per cycle is $45. I.R.C. §45M(b)(1)(A). The credit amount for a dishwasher that is manufactured in calendar year 2008, 2009 or 2010 and that uses no more that 307 kilowatt hours per year and 5.0 gallons per cycle (5.5 gallons per cycle for dishwashers designed for greater than 12 place settings) is $75. I.R.C. §45M(b)(1)(B).
The term “dishwasher” means a residential dishwasher subject to the energy conservation standards established by the Department of Energy. I.R.C. §45M(f)(2).
Clothes washers
The credit for a residential top-loading clothes washer manufactured in calendar year 2008 that meets or exceeds a 1.72 modified energy factor and does not exceed a 8.0 water consumption factor is $75. I.R.C. §45M(b)(2)(A). The credit for a residential top-loading clothes washer manufactured in calendar year 2008 or 2009 that meets or exceeds a 1.8 modified energy factor and does not exceed a 7.5 water consumption factor is $125. I.R.C. §45M(b)(2)(B). The credit for a residential or commercial clothes washer manufactured in calendar year 2008, 2009 or 2010 that meets or exceeds a 2.0 modified energy factor and does not exceed a 6.0 water consumption factor is $150. I.R.C. §45M(b)(2)(C). The credit for a residential or commercial clothes washer manufactured in calendar year 2008, 2009 or 2010 that meets or exceeds a 2.2 modified energy factor and does not exceed a 4.5 water consumption factor is $250. I.R.C. §45M(b)(2)(D).
The term “clothes washer” means a residential model clothes washer, including a commercial residential style coin operated washer. I.R.C. §45M(f)(3). The term “top-loading clothes washer” means a clothes washer that has the clothes container compartment access located on the top of the machine and that operates on a vertical axis. I.R.C. §45M(f)(4).
Refrigerators
The credit for refrigerators is based on their energy savings relative to the energy conservation standards promulgated by the Department of Energy that took effect on July 1, 2001. I.R.C. §45M(b)(3) & §45M(f)(8).
A refrigerator manufactured in calendar year 2008 and consumes at least 20% but not more than 22.9% less kilowatt hours per year than the 2001 energy conservation standards receives a $50 credit. I.R.C. §45M(b)(3)(A). A refrigerator manufactured in calendar year 2008 or 2009 and consumes at least 23% but not more than 24.9% less kilowatt hours per year than the 2001 energy conservation standards receives a $75 credit. I.R.C. §45M(b)(3)(B). A refrigerator manufactured in calendar year 2008, 2009 or 2010 and consumes at least 25% but not more than 29.9% less kilowatt hours per year than the 2001 energy conservation standards receives a $100 credit. I.R.C. §45M(b)(3)(C). A refrigerator manufactured in calendar year 2008, 2009 or 2010 and consumes at least 30% less energy than the 2001 energy conservation standards receives a $200 credit. I.R.C. §45M(b)(3)(D).
The term “refrigerator” means a residential model automatic defrost refrigerator-freezer that has an internal volume of at least 16.5 cubic feet. I.R.C. §45M(f)(5).
Eligible Production
The production in a calendar year eligible for the credit includes only the excess of the number of appliances of such type that are produced during such calendar year over the average number of appliances of such type that were produced by the taxpayer (or any predecessor) in the United States during the preceding 2-calendar year period. I.R.C. §45M(c).
Limitations
Dollar Limitation
The aggregate amount of credit allowed with respect to a taxpayer for any taxable year shall not exceed $75 million reduced by the amount of the credit allowed to the taxpayer (or any predecessor) for all prior taxable years beginning after December 31, 2007. I.R.C. §45M(e)(1). The $75 million dollar limitation shall not be taken into account for refrigerators eligible for the $200 credit and clothes washers eligible for the $250 credit. I.R.C. §45M(e)(2).
2% Gross Receipts Limitation
The credit with respect to a taxpayer for the taxable year shall not exceed an amount equal to 2% of the average annual gross receipts of the taxpayer for the 3 taxable years preceding the taxable year in which the credit is determined. I.R.C. §45M(e)(3). Gross receipts for any taxable year are to be reduced by returns and allowances made during such year. I.R.C. §45M(e)(4) & §448(c)(3)(C). The preceding 3 year period includes gross receipts of the taxpayer or any predecessor to the taxpayer. I.R.C. §45M(e)(4) & §448(c)(3)(D).
If the entity was not in existence for the entire preceding 3 taxable years, the percentage of average annual gross receipts are to be applied on the basis of the period during which such entity was in existence. I.R.C. §45M(e)(4) & §448(c)(3)(A). Gross receipts for any taxable year of less than 12 months are to be annualized by multiplying the gross receipts for the short period by 12 and dividing the result by the number of months in the short period. I.R.C. §45M(e)(4) & §448(c)(3)(B).
Controlled Group
Generally, controlled groups of corporations meeting certain definitional requirements and partnerships and proprietorships under common control are treated as single producers for purposes of the credit. I.R.C. §45M(g)(2)(A). Foreign corporations are not considered excluded members of a controlled group of corporations. I.R.C. §45M(g)(2)(B).
Carryback and Carryforwards
While Code §39 generally provides for a 1 year carryback and 20 year carryforward for current year business credits that exceed the limitation of Code §38(c), no portion of the unused business credit can be carried back to a tax year before the first year for which that credit is allowed. I.R.C. §§39(a) & (d).
Verification
No amount of credit will be allowed with respect to which a taxpayer has not submitted such information or certification as the Secretary, in consultation with the Secretary of Energy, determines to be necessary. I.R.C. §45M(g)(3).
Effective Date
Act Sec. 305 applies to qualifying energy efficient appliances produced after December 31, 2007.
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