Energy Policy Act of 2005 

(2005 EPACT)

     President George Bush signed the Federal Energy Policy Act on August 8, 2005 (2005 EPACT).  This is the first major federal energy legislation since 1992.  The 2005 EPACT contains 25 Titles and is 1,724 pages long.  It contains $2 billion in tax incentives for the two years of 2006 and 2007 only.  The 2005 EPACT contains tax incentives for Equipment Manufacturers, Commercial buildings both existing and new construction, Residential New Construction, Home Owners existing homes, and Consumers of energy efficient autos.  The tax incentives are in the form of Tax Deductions and Tax Credits, depending on the categories or titles.  It is vital that you talk with a Tax Consultant about the details of filing for the EPACT incentives.

TAX CREDITS

Tax Credits are subtracted from the total amount of money that you owe to the IRS for your taxes.  For example; A home owner "Jane" is taxed by the IRS $5,000 at the end of the year on her personnel taxes.  during the year Jane remodeled her home and portions of what she did was eligible for a $2,000 tax credit via EPACT 2005.  The tax credit of $2,000 will be subtracted from the bottom line total Jane owes.  So Jane will now only pay the IRS $3,000 ($5,000 - $2,000 = $3,000).

 

TAX DEDUCTIONS

Tax Deductions are line item entries that reduce the taxable income.  Deductions are not subtracted directly from the total amount of taxes.  If Jane is taxed $5,000 and received a $2,000 tax deduction via EPACT 2005, her taxable income would have been reduced by $2,000.  If she was in the 20% tax bracket, then she would have saved 20% of $2,000 or $400 on her taxes.  Her taxes would be $5,000 - $400 = $4,600.  Any reduction in taxes is a good thing, but a $2,000 tax credit is worth much more than a $2,000 tax deduction.

Go to the button links above to get the details of what tax incentive the EPACT 2005 has available for you, what process must be followed to receive the incentive, and related Green building information. 

Legislative Action to Extend and Improve the 2005 EPACT

Listed below is one of many bills in process.  Now is the time to contact your legislators and support these efforts.

Snowe-Feinstein - "A bill to amend the Internal Revenue Code of 1986 to Improve and Extend Certain Energy-related Tax Provisions" (S. 3628)

Among provision of this legislation is:

• Extension of the new homes credit through the year 2010

• A performance based tax credit to improve the efficiency of existing homes. This proposed tax credit is based on a sliding scale depending on the percentage of energy savings. The credit ranges from $800 for 20% savings to $2,000 for 50% savings. The procedures for third-party certification parallel those currently used for the new homes tax credit enacted in EPAct 2005. The incentives begin on date of enactment and expire on December 31st, 2010. The credit applies both to owner-occupied homes and to renter-initiated retrofits. The proposed legislation states that the certification shall be "based on the Residential Energy Services Network (RESNET) Technical Guidelines on the date of the enactment of this section."

• Establishes a $500 tax credit for individuals to be trained and certified to conduct the inspection and testing to certify homes for the new and existing homes tax credit. To qualify the rater would have to perform a minimum of 25 tax credit certifications in the tax year. The section also provides for a maximum credit of $1,000 for raters to purchase the following performance testing equipment:

  • blower doors

  • duct leakage testing equipment

  • flue gas combustion equipment

  • digital manometers

• Extension through 2010 and modifications of the commercial buildings energy efficient tax deduction.