Letter to the U.S. Senate Urging Extension of the energy-efficient New Homes Tax Credit

October 2, 2009

Honorable Senator Max Baucus
Chairman, Senate Finance Committee
Hart Senate Office Building, Room 511
Constitution Avenue and 2nd Street, NE
Washington, DC 20510-2602

Honorable Senator Charles Grassley
Ranking Member, Senate Finance Committee
Hart Senate Office Building, Room 135
Constitution Avenue and 2nd Street, NE
Washington, DC 20510-1501

Dear Chairman Baucus and Ranking Member Grassley,

We the undersigned represent a broad-based coalition of energy efficiency and environmental organizations, public interest organizations and corporations. As you consider energy tax incentive legislation this fall, we urge your support for a package of bills introduced last month by Senators Bingaman, Snowe and Feinstein. These bills will expand and extend incentives for energy efficiency improvements and new efficient buildings in the residential and industrial sectors, and we urge you to support these initiatives and do everything possible for the Finance Committee to favorably report these bills before the end of the year. Tax credits for efficiency upgrades have proved to be an effective means to help consumers overcome the upfront costs associated with otherwise cost-effective efficiency improvements. Existing credits have proved popular and these two bills would expand and extend these types of credits while raising the bar for some to drive technological innovation by focusing incentives toward cutting edge projects and improvements.

The first bill is the Expanding Building Efficiency Incentives Act of 2009 (S. 1637), that would expand and establish several incentives related to whole-building energy efficiency.

• The bill would extend to 2012 the popular Energy Efficient Homes credit, which offers $2,000 off taxes for homes that are built to consume 50% less energy than the 2004 supplement to the 2003 International Energy Conservation Code (IECC) building energy code. It would also offer a higher-tier credit, worth $5,000, available through 2013, for homes that also meet additional standards for heating, ventilation, cooling, lighting, and appliance energy use.
• The existing Energy Efficient Manufactured Homes credit, for those purchasing high-efficiency ENERGY STAR manufactured homes, would be increased from $1,000 to $1,500. A higher-tier credit, worth $2,500, would be created for those manufactured homes that meet new, more stringent ENERGY STAR criteria effective in 2010.
• As an incentive to incorporate efficiency into low-income housing projects, developers of housing that qualifies for the Low-Income House Tax Credit could claim up to 150% of the value of the Energy Efficient Homes credit to which it would otherwise be eligible.
• The existing Energy Efficient Commercial Building tax deduction would be increased. The deduction, available for commercial buildings that are 50% better than the ASHRAE 90.1-2001 energy code in terms of lighting, building envelope, and heating, ventilating and air-conditioning (HVAC) systems, would increase from $1.80 per square foot to $3 per square foot. A partial deduction for buildings meeting any one of these three efficiency areas is currently eligible for a 60¢ per square foot credit; this bill would increase the partial deduction to $1 per square foot or an intermediate $2.20 per square foot.
• Of particular note, this bill would create a $200 credit for certified home energy ratings – making the rating or auditing of one’s home even more attractive as a step towards improving its efficiency. Correspondingly, there would be a credit of up to $500 for an individual to become a certified energy rater.

The second bill, the Expanding Industrial Energy Efficiency Incentives Act of 2009 (S. 1639) would expand the existing combined-heat-and-power systems incentive, establish a credit for energy-saving variable-speed electric motors, incentivize the replacement of CFC-based chillers, and create an investment tax credit for equipment that facilitates the reuse of water and greater water efficiency in industrial processes.

• The combined heat and power tax credit, currently applicable to the first 15 megawatts or 20,000 horsepower of a system’s capacity, would be expanded to apply to the first 25 megawatts or 34,000 horsepower. Whereas currently the credit can only be claimed for systems of up to 50 MW or 67,000 hp, that cap would be eliminated under this bill. The credit would remain available through 2016.
• For advanced motor designs that provide built-in variable speed operation, a credit of $120 per horsepower would be available to original equipment manufacturers, up to a maximum of $2 million per taxpayer. The credit would be available through 2013.
• In order to speed the retirement of older CFC-based chiller units manufactured between 1980 and 1993, which can contribute to ozone depletion, the bill would create a credit of $150 per ton of the chiller system being replaced. The new unit would have to meet certain efficiency standards and the building would have to receive an energy audit to identify ways in which energy consumption generally and cooling load specifically could be reduced. An additional $100 credit would be available to the taxpayer for each ton of cooling capacity by which the new unit was downsized relative to the one being replaced. In the case of a non-profit entity, this credit could be claimed by the seller of the new unit if the seller reduced the price of such a chiller unit by the amount of the credit. The credit would be available through 2012.
• A credit to encourage greater water reuse and water efficiency in industrial processes would be worth up to $10 million per site. Eligible projects require the reduction of water withdrawals by not less than 20% and discharge by not less than 10%—or water withdrawals by no less than 10% and water discharge by no less than 20%. The credit value is determined using a sliding percentage based on the net energy use required to treat the water for reuse, from 10% for projects consuming less than 3,000 kWh per million gallons of water to 30% for projects consuming 1,000 kWh per million gallons or less. The credit would be available through 2014.

These are excellent bills that will increase energy efficiency in addition to extending existing, proven credits. We strongly urge the Finance Committee to favorably report these bills to the full Senate this fall. If you have any questions about the Energy Efficiency Coalition or our support and recommendations for this legislation, please do not hesitate to contact Brad Penney at bpenney@ase.org or 202-530-4348.

Sincerely,

• Alliance to Save Energy
• American Council for an Energy-Efficient Economy
• American Institute of Architects
• Environmental and Energy Study Institute
• Johnson Controls, Inc.
• Knauf Insulation
• National Association of Energy Service Companies
• National Association of State Energy Officials
• Natural Resources Defense Council
• North American Insulation Manufacturers Association
• Polyisocyanurate Insulation Manufacturers Association
• Recycled Energy Development
• Schneider Electric
• Serious Materials
• The Dow Chemical Company
• The National Trust for Historic Preservation