ENERGY EFFICIENCY AND CONSERVATION MEASURES
IN NEW FEDERAL ENERGY POLICY ACT

On August 8, 2005, President Bush signed the Energy Policy Act of 2005. The Act contains a series of tax breaks aimed at encouraging conservation and fuel efficiency by individuals and manufacturers. Broadly speaking, the Act provides tax incentives for consumers to buy energy efficient assets and for manufacturers and builders to provide them. Following are highlights of key provisions of the Act:

• New tax credits for the purchase of hybrid, fuel cell, advanced lean-burn and other alternative power vehicles. The size of the credit varies depending generally on the weight class of the vehicle and the rated fuel economy. The credit applies to vehicles placed in service after 2005, with termination dates varying with the type of alternative power vehicle. Additionally, Code Sec. 179A (the current law deduction for certain clean fuel vehicles and refueling property) now sunsets after 2005 (instead of after 2006, as was originally scheduled).

• New deduction for energy efficient commercial buildings meeting a specified energy reduction standard (generally 50% or more). This deduction is a major incentive for building owners to upgrade their systems and for those building new structures to design them in an energy-efficient manner. The deduction is available whether the building is new or used. The deduction (generally up to $1.80 per square foot, but 60¢ per square foot for certain separate building systems) is effective for property placed in service after Dec. 31, 2005 and before Jan. 1, 2008.

• New 30% business tax credit for the purchase of fuel cell power plants and a 10% credit for the purchase of stationary microturbine power plants, effective for periods after Dec. 31, 2005 and before Jan. 1, 2008, for property placed in service in tax years ending after Dec. 31, 2005.

• New business tax credit for contractors for the construction of new energy efficient homes. The credit is either $2,000 or $1,000 per home, depending on the type of home and the energy reduction standard it meets. The credit applies to homes whose construction is substantially completed after Dec. 31, 2005, and which are purchased after Dec. 31, 2005 and before Jan. 1, 2008.

• New 30% tax credit for the purchase of qualifying residential solar water heating, photovoltaic equipment, and fuel cell property. The maximum credit is $2,000 (for solar equipment) and $500 for each kilowatt of capacity (for fuel cells). The credit applies for property placed in service after 2005 and before 2008.

• New 10% personal tax credit for energy efficient improvements to existing homes. The lifetime maximum credit per taxpayer is $500 and applies for property placed in service after Dec. 31, 2005 and before Jan. 1, 2008.

• New manufacturers’ tax credit for energy efficient dishwashers, clothes washers, and refrigerators manufactured in 2006 and 2007. The maximum credit is $100 per dishwasher or clothes dryer, and $175 per refrigerator.

If you have further questions or would like to consult with us about the application of the Energy Policy Act to your business, please contact Randall L. Duncan, chair of our Closely Held Business team, and we would be happy to accommodate your request.

Closely Held
Business Team

The Closely Held Business Team - Dunn Carney is dedicated to assisting business owners in navigating through the opportunities and challenges the law presents to advance each owner’s success in business. They understand the multifaceted issues business owners face each day and the need for responsive and proactive legal counsel.

Team members include:
Randy Duncan, Team leader
Bob Allen
Ric Ashe
David Buono
Brian Cable
Del Clark
Todd Cleek
Jack Cooper
Ken Davis
Frank Hilton
Scott Howard
Robert Kerr
JoDee Keegan
John O'Neil
Kyle Stinchfield
Bob Winger
J. David Zehntbauer