The Emergency Economic Stabilization Act of 2008 (EESA)

On October 3rd, 2008 President Bush signed into law H.R. 1424, the Emergency Economic Stabilization Act of 2008, which contains new and renewed tax incentives for consumers and businesses for energy-efficient homes and commercial buildings, equipment, and vehicles. The incentives originally enacted as part of the Energy Policy Act of 2005 encourage highly efficient commercial buildings, new homes, home improvements, heating and cooling equipment, appliances, and hybrid and diesel vehicles.  The new law adds incentives for combined heat and power, electric and plug-in hybrid vehicles, truck idling reduction, bicycling, and smart meters and smart grid.  These incentives are designed to speed the introduction of energy-efficient technologies into the marketplace, to help niche products with new, efficient technologies to overcome steep market barriers and move into the mainstream,enabling them to better flourish in the market when the tax incentives end.

Consumers who employ energy-efficient products in their homes or drive fuel-efficient vehicles enjoy multiple benefits. At home, these benefits include lower home energy bills, increased indoor comfort, and reduced air pollution. On the road, consumers will increase their gas mileage so they lower their gasoline costs, and they will dramatically reduce the amount of air pollution from their vehicles.

In addition to helping savvy consumers lower their energy bills at home and on the road, the energy-efficient products eligible for the new federal tax credits actually lower the amount of federal income taxes that these taxpayers must pay Uncle Sam.

Some of the incentives included within H.R. 1424 are:

• Extension of the credit for energy-efficient improvements to existing homes for 2009; this adds a credit for biomass fuel stoves (maximum of $300 credit), and clarifies the efficiency standard for water heaters.  In place of the previous credit for Energy Star ground source heat pumps a new more valuable credit is added for 30% of the cost up to $2000, available through 2016.
• Extension of the deduction for energy-efficient improvements to commercial buildings through 2013. The amount deductible is up to $1.80 per square foot of building floor area for buildings achieving a 50% energy savings target. The energy savings must be accomplished through energy and power cost reductions for the buildings heating, cooling, ventilation, hot water, and interior lighting systems. (5 year extension);
• Extension and modification of the manufacturer's EE appliance tax credits through 2010 for refrigerators, clothes washers, and dishwashers that are U.S.-produced. (3 year extension);
• Extension through 2009 (1 year extension) of the builder’s credit for energy-efficient new homes that achieve a 50% reduction in heating and cooling energy consumption relative to a comparable dwelling. In addition to the $2,000 credit for homes meeting a 50% standard, manufacturers of Energy Star manufactured homes can receive $1,000.
• New tax credit up to 10% of the cost of combined heat and power systems with at least 60% efficiency and with up to 50 MW capacity.
• Allows smart electric meters and smart grid systems to be depreciated over 10 years (instead of 20-year recovery period applicable under MACRS);
• New credit for qualified plug-in electric and plug-in hybrid vehicles. The credit for passenger vehicles and light truck ranges from $2500-$7500. The credit up phases out over a year after a total of 250,000 qualified vehicles are sold in the United States by all manufacturers combined.
• Allows up to $20 per month employer reimbursement for bicycle commuting costs tax-free.

The American Council for an Energy Efficient Economy (ACEEE) estimates that over the 2006-2020 period, the extended tax incentives could reduce consumer energy bills by $27 billion, prevent more than 51 million metric tons of carbon emissions, and reduce peak electric demand by more than 6,000 MW (equivalent to the capacity of 20 medium power plants). According to Alliance analysis, based on scoring by the Joint Committee on Taxation, the extensions will have a ten-year cost to the Treasury of about $2.1 billion and the new incentives will cost another $2 billion.

By making new energy-efficient technologies more affordable, these tax incentives not only can lower energy prices by reducing demand, but also can generate innovative new industries with new jobs, improve the reliability of the electricity system, and reduce air pollution and greenhouse gas emissions.

For more information please visit the Alliance tax credits web page or contact Alliance policy staff at (202)857-0666 or policyinfo@ase.org

The Alliance to Save Energy is a coalition of prominent business, government, environmental and consumer leaders who promote the efficient use of energy worldwide to benefit consumers, the environment, the economy, and national security.
Updated October 2008