The Energy Policy Act of 2005 (EPAct 2005 H.R.6) created tax incentives for energy-efficiency measures in buildings or systems placed in service from Jan. 1, 2006 through Dec. 31, 2008. Proposals are pending before Congress to extend the qualifying period by several years. Current information is available at Energytaxincentives.org. The following is a summary of the tax credits available to builders and commercial property owners/developers.
Residential contractors may earn a tax credit of $2000 for homes that reduce energy use for heating/cooling (not including hot water) by 50% compared to the stated national model energy code—the 2004 Supplement to the 2003 International Energy Conservation Code—with a minimum SEER-13 for air conditioners and heat pumps. The building envelope component improvements must account for at least 1/5 of the 50% reduction, which clearly is achievable with insulating concrete form (ICF) construction. Third-party inspectors certified according to DOE rules must document compliance. Energy Star Raters can provide this inspection service, as well as energy modeling and design, in the planning phase of the project. RESNET offers a complete directory of raters at www.natresnet.org.
To qualify, contractors will need to submit IRS Form 8908 with their business tax returns. The directions for this form stipulate that the property must be acquired by an individual from the contractor during the tax year to use as a residence. This clause precludes the application of the tax credit to owners and builders. Instead, homeowners can apply for the Residential Energy Credit, using IRS Form 5695, only by Dec. 31, 2007. A credit is calculated for improvements to energy efficiency, both through improvements to the building envelope, as well as installation of renewable energy systems. This credit is limited to a total combined amount of $500 for all tax years.
Business taxpayers (i.e. the building owners) can earn a deduction of $1.80 per square foot for commercial buildings that achieve a 50% reduction in annual energy costs, compared to a base building defined by the industry standard ASHRAE/IESNA 90.1-2001. Energy costs refer to heating, cooling, lighting, and water heating because only these uses are within the scope of the ASHRAE standard and within the control of the building designer.
Note that energy use in commercial construction can be caused by internal factors, which might outweigh the impact of the external environment on the building. Typical examples include increased cooling load due to heat generated by machinery or people.
The requirement of 50% savings over the 2001 ASHRAE Standard may require significant measures, as the ASHRAE standard is already a challenging benchmark. Partial deductions of 60 cents per square foot can be taken for improvements to one of three building systems—building envelope, lighting, or heating/cooling system—that reduces total energy consumption by 16.66% (16.66% is the 50% goal for the three systems spread equally over the three systems). Also note that tax incentives for photovoltaic and solar water systems are only for residential use, not for commercial construction.
ICFS Fit The Bill
The unique combination of continuous insulation, airtight construction, and thermal mass of ICF construction contributes significantly to energy savings. By using ICFs, a contractor is well on the way toward qualifying for the Energy Efficient Home Credit. It is most beneficial to engage a residential energy modeler in the design stage of the building project to help identify the most cost-effective of the possible energy measures. Raters may then return for an onsite inspection to measure the air tightness of the home at the completion of the project using a blower door test. This same RESNET rater and testing procedure is used for the Energy Star labeling, for Energy Efficient Mortgages, and for “rightsizing” HVAC units.