Enterprise Point of Contact:
Michael A. SpottsSenior Policy Analyst
Last Updated: March 30, 2012
Issue Background: Residential Energy Efficiency Tax Incentives
The Energy Efficient New Homes Tax Credit, created in the Energy Policy Act of 2005 (Public Law No. 109-58) and authorized under section 45L of the Internal Revenue Code, provides a $1,000 or $2,000 tax credit (depending on the energy savings achieved) to an eligible contractor who constructs a qualified energy efficient home.The Energy Efficient New Homes Tax Credit (45L credit) has been successfully used to promote the construction of new, energy efficient single-family homes and low-rise residential buildings. However, the credit cannot be effectively used with the Low Income Housing Tax Credit (Housing Credit). Enterprise worked with Congress to draft language included in the Expanding Building Efficiency Incentives Act of 2009 (S. 1637) that identifies how the 45L credit can more effectively interface with the Housing Credit to promote green construction practices in the development of multifamily affordable housing.
Current Policy State
Congress passed a two-year extension of the 45L Credit through the end of 2011 as part of the Tax Relief, Unemployment Insurance Reauthorization, and Job Creation Act of 2010 (Public Law 111-312) on December 17, 2010.The Expanding Building Efficiency Incentives Act of 2009 was introduced in both the House (H.R. 4226) and Senate (S. 1637) during the 111th Congress. This legislation would have extended the Energy Efficient New Homes Tax Credit through 2013 and modified section 45L so that it can be more effectively used to make Housing Credit-financed affordable rental housing energy efficient. Similar provisions were included in the Advanced Energy Tax Incentives Act (S. 3935). While these bills did not advance during the 111th Congress, similar legislation is expected to be introduced in the 112th Congress.
The Obama Administration proposed revisions to the Energy Efficient Commercial Buildings Tax Deduction (Section 179D of the Internal Revenue Code) as part of the Better Buildings Initiative in its fiscal year 2012 budget. The current version provides a tax deduction of $1.80 per square foot for a 50 percent or greater reduction in total energy and power costs. The Administration proposal would replace the existing tax deduction with a tax credit and create a tiered structure based on the amount of energy savings. Enterprise is working with Congress and with other stakeholders to ensure that the proposed tax incentives can be effectively used in affordable multifamily housing.
Legislative Priorities
Enterprise supports the introduction and passage of the 45L credit provisions that were included in S. 1637 in order to provide new incentives for increasing energy efficiency in affordable multifamily housing. If these changes are adopted, low-income families will benefit from lower utility costs, developers will benefit from better building performance and reduced operating costs and the economy will benefit with the creation of green jobs. For the same reasons, Enterprise supports the introduction and passage of revisions to Section 179D that provide an additional new incentive for increasing energy efficiency in affordable multifamily housing.Publications and Resources
Cuurent Residential Energy Efficiency Tax Incentive-Related Legislative Proposals (112th Congress)
- Repeal Big Oil Tax Subsidies Act (S. 2204; bill contains an extension of the 45L credit)
- Cut Energy Bills at Home Act (S. 1914)
Previous Residential Energy Efficiency Tax Incentive-Related Legislative Proposals (111th Congress)
- Tax Relief, Unemployment Insurance Reauthorization, and Job Creation Act of 2010 (Public Law 111-312)
-
Expanding Building Efficiency Incentives Act of 2009 (S. 1637 and H.R. 4226)
- Enterprise Summary of 45L Credit-Related Legislation for the 111th Congress
- Job Creation and Tax Cuts Act of 2010 (S. 3793)
- Advanced Energy Tax Incentives Act (S. 3935)