Commercial and Manufacturing Tax Incentives
Updated: August 7, 2013
Tax incentives for businesses can help defray the costs of improving a business’s energy efficiency or of manufacturing energy efficient appliances. This page seeks to present a general overview of the credits and deductions available to businesses to reduce the cost of energy efficiency. For further details, businesses should consult tax professionals and the Internal Revenue Service.
Table of Contents
- Energy Efficient Commercial Buildings Deduction
- Appliance Manufacturers' Tax Credit
- New Home Builders' Tax Credit
- Electric Vehicles and Refueling Property Tax Credit
Please note: We at the Alliance to Save Energy are experts on energy efficiency, not taxes, and we do not provide tax advice; you may want to consult a tax professional.
The tax deduction for commercial buildings (section 179D of the tax code) is available for businesses that improve the performance of three building elements:
- Building envelope
- Heating, ventilation and air conditioning (HVAC) systems
The deduction is worth $1.80 per square foot of the building for retrofits that address all three of the above-mentioned areas. A partial deduction of $0.60 per square foot is available for projects that address one of these three areas. This deduction would usually be for the building’s owner, but in some situations could be claimed by a building tenant.
To qualify for the full deduction, the retrofit must bring the building to performance levels at least 50% better than the requirements of the ASHRAE Standard 90.1-2001 in the three categories. For the partial credit, building retrofits in one of the three categories must reduce building energy use beyond the ASHRAE 90.1-2001 requirements by 16 2/3%.
The work must be certified by “qualified individuals” using approved software and must include a site visit. The National Renewable Energy Laboratory’s Energy Savings Modeling and Inspection Guidelines for Commercial Building Federal Tax Deductions provides extensive information on these requirements.
Only buildings covered by the ASHRAE Standard 90.1-2001 are eligible for this credit. It is available through December 31, 2013. For government-owned buildings, the credit may be claimed by the designer(s) of the retrofit.
Credits for manufacturers of efficient appliances (section 45M in the tax code) provide an incentive for the manufacture of highly efficient dishwashers, clothes washers, and refrigerators.
The number of units of a product eligible for the credit is determined by subtracting the average annual production of units over the previous two years from the number of units produced in a given tax year. For one year, a manufacturer may claim no more than $25 million, and the credit value cannot exceed 4% of the company’s gross receipts. This credit expired at the end of 2011, but was reinstated until December 31, 2013 by the American Taxpayer Relief Act of 2012.
The credits for appliances manufactured in 2011, 2012, or 2013 are as follows:
|$25||Uses no more than 307 kWh per year and 5.0 gallons per cycle (5.5 gallons for dishwashers designed for more than 12 place settings)|
|$50||Users no more than 295 kWh per year and 4.25 gallons per cycle (4.75 gallons for dishwashers designed for more than 12 place settings)|
|$75||Uses no more than 280 kWh per year and 4 gallons per cycle (4.5 gallons for dishwashers designed for more than 12 place settings)|
|$175||Top-loading, has a modified energy factor of at least 2.2 and a water consumption factor of not more than 4.5|
|$225||Top-loading, has a modified energy factor of at least 2.4 and a water consumption factor of not more than 4.2|
|$225||Front-loading, has a modified energy factor of at least 2.8 and a water consumption factor of not more than 3.5|
|$150||Consumes at least 30% less energy than the 2001 energy conservation standards|
|$200||Consumes at least 35% less energy than the 2001 energy conservation standards|
Source: IRS, updated August 2013.
The New Energy Efficient Homes credit (section 45L of the tax code) is worth $2000 to builders of homes (including manufactured homes) that are projected to save at least 50% of heating and cooling energy compared to the requirements of the 2006 International Energy Conservation Code (IECC); building envelope components must make up at least one fifth of this improvement. Producers of manufactured homes that meet ENERGY STAR requirements or whose energy use is 30% below the 2006 IECC are eligible for a $1000 credit, with at least one third of this reduction coming from envelope components.
This credit expired at the end of 2011, but was extended through the end of 2013, and retroactively for 2012, due to Congress’ enactment of the American Tax Pay Act of 2012.
Highway-capable battery-powered plug-in vehicles and plug-in hybrids purchased new – by companies or individuals – may be eligible for a credit of up to $7,500, based on their battery capacity (section 30D of the tax code). This credit begins to phase out for a given manufacturer once that manufacturer has sold 200,000 qualifying vehicles in the United States.
Vehicle Year and Model
2014 Accord Plug-In Hybrid
2012 AMP GCE & MLE EV
2011/2012 Azure Dynamics Transit Connect EV
2012 BYD e6 EV
2013 Fiat 500e
2010-2012 CODA Sedan
2011-2012 EVI Medium Duty & Walk-In Electric Trucks
2010 EMC Model E36 7, E36t & E36v
2012 Fisker Karma Sedan
2012-2013/2014 Ford Focus Electric
2013 Ford C-MAX Energi
2013-2014 Ford Fusion Energi
2011-2014 Chevrolet Volt
2014 Chevrolet Spark EV
2013 Mercedes-Benz smart Coupe/Cabrio EV
2012 Mitsubishi i-MiEV
2011-2013 Nissan Leaf
2011 Smart Fortwo Electric Drive Vehicle
2008-2011 Tesla Roadster
2012 Tesla Model S
2011 Think City EV
2012-2013 Toyota Prius Plug-in Electric Drive Vehicle
2012-2013 Toyota RAV4 EV
2011 Wheego LiFe EV
Source: IRS, updated August 2013
A smaller credit of up to $2,500 for certain "low-speed" neighborhood electric vehicles (including two- and three-wheeled vehicles) is available for those acquired after December 31, 211 and before January 1, 2014 (section 30 of the tax code).
There is also a credit for “Alternative Fuel Vehicle Refueling Property,” (section 30C of the tax code). The tax credit is worth 30% of costs for certain refueling equipment for alternative fuel vehicles, including equipment to recharge electric vehicles, as well as to refuel vehicles that run on such fuels as hydrogen, natural gas, high-ethanol content blends, and other alternative fuels. Various limits and restrictions apply.