This article was originally published in the March/April 1999 issue of Home Energy Magazine. Some formatting inconsistencies may be evident in older archive content.


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Home Energy Magazine Online March/April 1999

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Energy Tax Credit May Materialize

If the proposed Climate Mitigation Tax Credit Bill surmounts numerous congressional hurdles, taxpayers may be able to claim tax credits for energy efficient heating and cooling systems, cars and light trucks, and even superefficient new homes. The credits could provide an economic boost to insulation, HVAC, and other contractors, and possibly to home energy raters. As it is currently written, the bill defines superefficient new homes as ones that meet their heating, cooling, and hot water needs using 50% less energy than the level prescribed by the Model Energy Code, now known as the International Energy Conservation Code (IECC). The proposed allowable credit for such an energy-efficient home would be 1% of the purchase price, up to a maximum of $2,000.

However, nearly every detail of this bill is still a matter of contentious debate, including the definition of a superefficient home and whether existing homes should also qualify for the credit. John Talbott, senior engineer with the Department of Energy's Office of Building Systems, has been working with analysts at the Treasury Department on assessing the economic impacts of various tax credit variations. He says the analysts are discussing almost an unlimited number of variations. They are analyzing various options for the tax credit requirements, such as cutting energy use to only 30% or 40% below IECC levels, says Talbott. They are also looking at variations on the tax credit amounts. This could tie up the analysis community for a significant amount of time, which unfortunately they don't have.

David Goldstein, energy-based program codirector with the Natural Resources Defense Council and an enthusiastic proponent of an energy tax credit, takes issue with defining a superefficient home as one that uses a certain amount less energy than the level prescribed by the IECC. He argues that the IECC is a prescriptive standard and does not define energy use calculations clearly enough to allow for reliable assessments of energy use reductions. Instead, he recommends offering a choice between using a more explicit prescriptive option or using a performance-based standard defined with the detail required by California's Title 24 regulations. He also recommends extending partial tax credit to existing homes whose features meet the required performance standard.

According to Talbott, the extent of computational rigor needed to demonstrate compliance is one consideration in the discussions of how to make the tax proposal workable for the taxpayer. Other issues on the table include the certification process and the format of the various forms.

Another energy-efficiency analyst, who asked not to be identified, has his own concerns about how homes will get certified. If a home energy rating is required to get the tax credit, as has been proposed, and a rating costs $400, how many homeowners are going to find a $1,000 or even a $2,000 tax credit a sufficient enticement? Instead of mandating professional verification, he advocates awarding the credit based on the components included in the house. If, for example, a home was built using R-38 insulation in the ceiling, windows with a .30 performance rating, and a SEER-13 air conditioner, then the homeowner would get the credit. The tax credit requirements should make sense to a consumer who spends five minutes studying them, says this analyst.

Whatever the final details of the bill turn out to be, Ed Osann, senior associate with American Council for an Energy Efficient Economy, gives some version of an energy credit bill a likely chance of passing. The Republicans will want some tax package to get passed in 1999, Osann says, and this tax credit is a modest enough proposal that the White House should be able to get it included. To get current information on the state of the tax credit bill, visit

--Mary James



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