The Cut Energy Bills at Home Act

Whole-home efficiency tax credit would encourage deep retrofits

Senators Snowe (R-Maine), Bingaman (D-N.M.) and Feinstein (D-Calif.) introduced a bill to incentivize deep retrofits of homes, the Cut Energy Bills at Home Act (S. 1914), on November 18th, 2011. Whereas the existing home energy efficiency improvement tax credit (the “Non-business Energy Property” tax credit, in section 25C of the tax code) provides incentives for individual qualifying products, such as a window or a furnace, this proposal looks at a home as a total system and would provide a tax credit for overall energy efficiency improvements. The bill is envisioned as an alternative to the 25C credit and would be numbered 25E in the tax code. The Alliance to Save Energy has been involved in long-running discussions that developed the concept and structure of this proposed tax credit.

The bill would create a new tax credit based on annual predicted energy cost savings from heating, cooling, hot water, and “permanent lighting” in a taxpayer’s primary residence. For a minimum credit of $2000, homes would need to reduce energy costs by 20%; for each additional 5% savings beyond that, the credit would be worth an additional $500 (e.g. a home that reduced energy costs by 30% would be eligible for a $3000 credit). However the credit could not be greater than either $5000 or 30% of the taxpayer’s expenditures (inclusive of labor, diagnostics and modeling costs).

The credit could not be claimed for improvements for which a homeowner also claimed the 25C retrofit credit, any other federal credit, or any federal energy efficiency rebate. Reductions in energy use from renewable energy generally would not count toward this credit. The credit would not apply to a home expansion, or to improvements in a swimming pool or hot tub. Improvements would have to be reasonably expected to last at least five years.

Improvements would have to be “designed, implemented, and installed” by a contractor accredited by the Building Performance Institute (BPI), Residential Energy Services Network (RESNET), or similar accreditation approved by the Treasury Department. To ensure quality the contractor would need to follow a test-out procedure under the certification.

To determine energy savings, the contractor would establish a baseline energy use using a specified BPI standard method, and then calculate savings with RESNET-certified software (or approved alternatives to either).

The contractor would document the improvement with photographs and with a statement including:

• Certification that the retrofit met the regulations established for this credit,
• The type of software used to model baselines and savings,
• The percent reduction in energy use,
• A list of improvements and that they were installed according to requirements,
• A statement that the contractor meets the required accreditations, and
• The cost of the project.

The contractor would need to retain all such relevant information for a period of five years.

The Department of the Treasury, in consultation with the Department of Energy, would review the performance of the credit and report such information to Congress by June 30, 2014, along with recommendations for improvement and consideration of if or how the credit could be expanded to the rental market.

The credit would be available from the start of 2012 to the end of 2016.

Additional Resources:

Bill Text (pdf)

Official Press Release (pdf)