Stimulus Act Expands Clean Energy Tax Credits for Homes and Businesses

Photo of the Chevy Volt, a four-door sedan with a steeply raked windshield that blends into a black roof, which continues to the car's tail end. The car has narrow, squinty headlights, unusual L-shaped fog and turn lights in front, and a closed grill.

The American Recovery and Reinvestment Act of 2009 will provide a number of tax credits for the manufacture and sale of the Chevy Volt, a plug-in electric vehicle that is slated for production in 2010.
Credit: © GM Corp.

President Barack Obama signed the American Recovery and Reinvestment Act of 2009 on February 17, and the tax section of the act provides greater tax credits for clean energy projects at homes and businesses and for the manufacturers of clean energy technologies. For homeowners, the act increases a 10% tax credit for energy efficiency improvements to a 30% tax credit, eliminates caps for specific improvements (such as windows and furnaces), and instead establishes an aggregate cap of $1,500 for all improvements placed in service in 2009 and 2010 (except biomass systems, which must be placed in service after the act is enacted). The act also tightens the energy efficiency requirements to meet current standards. For residential renewable energy systems, the act removes all caps on the tax credits, which equal 30% of the cost of qualified solar energy systems, geothermal heat pumps, small wind turbines, and fuel cell systems. The act also eliminates a reduction in credits for installations with subsidized financing. See pages 41-47 of the American Recovery and Reinvestment Tax Act of 2009 (PDF 5.9 MB), as well as PDF pages 125-129 (labeled as pages 123-127) of the accompanying joint explanatory statement of the conference committee (PDF 24.9 MB) Download Adobe Reader.

For businesses and individuals buying electric vehicles, the act simplifies and expands the available tax credits. For electric low-speed vehicles, motorcycles, and three-wheeled vehicles, a 10% tax credit is available through 2011, with a cap of $2,500. For vehicles converted into qualified plug-in electric vehicles, a 10% tax credit is also available through 2011, with a cap of $4,000. And starting in 2010, full-scale commercial plug-in electric vehicles can earn a maximum tax credit of $7,500, depending on their battery capacity. The credit will phase out over a year for each manufacturer after they sell 200,000 plug-in vehicles. See pages 50-68 of the act, as well as PDF pages 138-141 of the joint explanatory statement of the conference committee.

The act also provides a bonus to homeowners or business owners installing clean fuel refueling systems at their homes or businesses. For businesses, the maximum credit for installing such refueling systems increases to $50,000 for most systems, up from $30,000, and it increases to $200,000 for hydrogen refueling stations. For homeowners, the credit is doubled from $1,000 to $2,000. Homeowners might install their own natural gas refueling system for a natural gas vehicle, or they might install recharging systems for plug-in electric vehicles. The credit is available through 2010 for most refueling systems and through 2014 for hydrogen refueling systems. See pages 47-48 of the act, as well as PDF pages 130-131 of the joint explanatory statement of the conference committee.

The economic stimulus act has also added a new tax credit to encourage investment in the manufacturing facilities that help make such clean energy projects possible. A new 30% investment tax credit is available for projects that establish, re-equip, or expand manufacturing facilities for fuel cells, microturbines, renewable fuel refineries and blending facilities, energy saving technologies, smart grid technologies, and solar, wind, and geothermal technologies. The credit also applies to the manufacture of plug-in electric vehicles and their electric components, such as battery packs, electric motors, generators, and power control units. The credit may also be expanded in the future to include other energy technologies that reduce greenhouse gas emissions. The Secretary of Treasury must establish a certification program within the next 180 days and may allocate up to $2.3 billion in tax credits. See pages 101-110 of the act, as well as PDF pages 142-144 of the joint explanatory statement of the conference committee.

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