WASHINGTON, D.C. – U.S. Senators Ben Cardin (D-Md.), Dianne Feinstein (D-Calif.) and Brian Schatz (D-Hawaii), have introduced legislation (S. 2189, the Energy Efficiency Tax Incentives Act) that will boost energy efficiency in government, in industry, and in commercial and residential buildings which account for more than 40 percent of energy consumption in the United States.  A recent McKinsey study concluded that maximizing energy efficiency for homes and commercial buildings could help reduce U.S. energy consumption by 23 percent by 2020. This is the equivalent of taking all passenger cars and light trucks off the road for a year.

“Energy efficiency improvements are a smart, cost-effective way to reduce pollution, increase the competitiveness of our manufacturers, and put Americans back to work. It’s simply good business and good policy,” said Senator Cardin, a member of the Senate Finance and Environment and Public Works Committees. “As a nation, we are becoming more energy efficient, but we have a long way to go. Encouraging the retrofitting of existing buildings needs to be a priority as up to 80 percent of the buildings standing today will still be here in 2050. Our Tax Code can be an effective tool in promoting energy efficiency building and retrofits in all sectors.”

“Energy efficiency is one of the most cost-effective options we have to reduce energy consumption and greenhouse gas emissions,” said Senator Feinstein, Chair of the Appropriations Energy and Water Subcommittee. “The Energy Efficiency Tax Incentives Act will reward investments in the commercial, residential and industrial sectors based on actual improvements to their energy efficiency. The smart tax incentives in the bill can promote green jobs, reduce pollution and expand the market for energy efficient technologies and products.”

“As we transition to a clean energy economy, we must do more to adopt energy efficiency policies that make it easier for businesses and homeowners to save energy and reduce carbon pollution while saving money,” Senator Schatz, Chair of the Energy and Natural Resources Water and Power Subcommittee, said.  “These tax incentives will encourage energy efficiency in buildings and in America’s industrial sector and create new construction and manufacturing jobs.”

The Energy Efficiency Tax Incentives Act Summary

The Energy Efficiency Tax Incentives Act provides important targeted tax incentives to improve energy efficiency outcomes for commercial buildings, homes, and the industrial sector.

Title 1: Commercial Building Modernization

• Restores the section 179D commercial building deduction, which expired at the end of 2013, to allow for the cost recovery for energy efficiency improvements to lighting, HVAC, and building envelope. This bill extends this performance-based incentive through 2016.

• Increases the maximum deduction from $1.80 to $3.00.
• Modernizes and enhances the deduction by updating energy efficiency standards and allowing a broader range of entities to fully utilize and allocation the deduction.

• Creates a new section under the Internal Revenue Code to encourage retrofitting existing buildings to be more energy efficient.  Currently, many retrofits—even those that improve an existing building’s energy efficiency by a significant percentage—cannot qualify for the section 179D deduction.

Title 2: Home Energy Improvements

• Creates a performance-based homeowner tax credit for a home renovation that increases the efficiency of a home by at least 20 percent.

• The tax credit would be $2,000 per home renovation, but it would increase $500 for every five percent in additional energy efficiency improvement achieved, with a cap of $5,000 for a home renovation that increases efficiency 50 percent or more.

Title 3: Industrial Energy and Water Efficiency

• Combined Heat and Power (CHP) Systems: Expands the 10 percent investment tax credit for CHP systems, enacted by Congress in 2008, from the first 15 megawatts to the first 25 megawatts of system capacity. The bill would create two new tiers of tax credit, available through 2018: 20 percent credit for CHP units achieving 75 percent efficiency, and a 30 percent credit for CHP units achieving 85 percent efficiency level.

• Thermal Biomass Credit: Creates a tiered investment tax credit for highly efficient thermal biomass incentives: 15% for systems that achieve 65% or greater efficiency and 30% for systems that achieve 80% or greater efficiency. Currently no incentives exist to promote thermal-only biomass use for commercial and industrial applications.

• Waste Heat to Power Credit: Creates a new 30 percent investment credit for qualifying waste heat to power systems.

• Industrial Motor Efficiency Credit: Establishes a $120-per-horsepower tax credit for efficient advanced motor systems with adjustable speed capability.

• CFC Chiller Replacement Credit: Creates a credit of $150 per ton, plus an additional $100 incentive for each ton downsized during replacement of large water-cooled chillers. This incentive only applies to chillers that use environmentally harmful CFC-11 and CFC-12 refrigerants.

• Industrial Water Reuse Credit: Creates a technology-neutral, performance-based investment tax credit for efficiency measures deployed to reduce water use in the manufacturing sector. 

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