Use of Residential Energy Tax Credits Increases


In 2005, Congress established several energy-efficiency tax incentives related to housing that benefit new-home buyers and remodeling homeowners. These policies included the tax code section 25C credit for retrofitting/remodeling existing homes, and the 25D credit for the installation of power production property in new and existing homes. Taxpayers claim these residential energy credits using Form 5695. Including carryforwards from 2019, 2.4 million taxpayers claimed at least one residential energy credit for tax year 2020—a 16.2% increase over 2019 and more than twice the number of returns filed for 2018. Although IRS income distribution data for these credits is not given for each line item, distribution data is published for total residential energy credits claimed on Form 5695. For tax year 2020, 86.9% of the tax returns claiming 25(c) and/or 25(d) were filed by taxpayers with an adjusted gross income (AGI) of less than $200,000. More than half of these returns—and roughly 40% of the total claimed—were filed by taxpayers with AGI less than $100,000. 25C: Credit for Nonbusiness Energy Property As in prior years, exterior window installation was the most prevalent use of the 25C credit in 2020. This was followed by (in descending order of the number of returns) furnace/hot water boiler, insulation, exterior doors, energy efficient building property, roofing, and advanced main air circulating fan. In terms of costs claimed, however, qualified roofing and insulation improvements accounted for nearly 60% of the total in 2020.  More than 180,000 taxpayers claimed the credit for energy-efficient roof upgrades totaling $1.4 billion while $1.3 billion was claimed by 391,000 taxpayers for qualified insulation improvements. Nearly half a million taxpayers claimed a 25C credit for window upgrades totaling $778 million. All categories of improvements saw increases in 2020 in both the total amount claimed as well as the number of returns filed. 25D: Energy Efficient Property Credit The story of 25D is more mixed.  While claims related to solar electric, solar water heating, and geothermal heat pump property costs increased in 2020, those for costs related to small wind energy and fuel cell property declined. From 2019 to 2020, claims associated with solar electric power grew by 86,000 taxpayers and $2.1 billion.  Conversely, during the same period, 25D claims related to small wind energy and fuel cells fell by 2,700 taxpayers and $123 million, declines of 0.6% and 8.0%, respectively. Including 367,000 returns using carryforwards of unused credits, a total of 898,000 taxpayers claimed 25D credits amounting to $3.5 billion. The most claimed qualifying activity for the 25D credit in 2020 was the installation of solar electric property.  More than 600,000 taxpayers claimed the credit for a total of almost $12.6 billion in qualifying costs of installation. The second most common installation in 2020 was for solar water heating property, which was claimed by 114,000 homeowners and totaled almost $627 million in installation costs. Related ‹ Private Residential Spending Falls Slightly in JanuaryTags: 25C, 25D, energy efficiency, energy tax credits, Form 5695, geothermal, hvac, income tax, individual income tax, internal revenue service, IRS, residential energy credits, solar electric, solar water heaters, tax, tax credits, tax incentives, windows

Use of Residential Energy Tax Credits Increases2023-03-02T15:23:48-06:00

OMB Proposes Standards on Building Materials Made in America


The Office of Management and Budget (OMB) has proposed new standards to determine if construction materials for federally funded infrastructure projects are made in the USA.  The new guidance, required by the Infrastructure Investment and Jobs Act—also known as the Bipartisan Infrastructure Law (BIL)—“sets standards to carry out the statutory requirement that all manufacturing processes for construction material occur in the United States.” Federally funded infrastructure projects include housing development that receives any federal support such as through the CDBG and HOME programs. Covered Construction Materials and Manufacturing Standards The Build America, Buy America Act (BABA)—part of the BIL—requires that OMB issue standards that define ‘‘all manufacturing processes’’ in the case of construction materials. Initial guidance (memorandum M–22–11) issued in April 2022 fell short of this and instead provided non-binding guidance on the definition of construction materials. The latest proposal includes an expanded list of products considered construction materials and proposes standards for ‘‘all manufacturing processes’’ for the manufacture of construction materials. Among construction materials covered by the guidance are lumber, drywall, glass, and plastics. The guidance includes domestic manufacturing process standards for the following construction materials. Defining Infrastructure According to OMB, infrastructure includes roads, highways, and bridges; water systems, including drinking water and wastewater systems; electrical transmission facilities and systems; utilities; broadband infrastructure; and buildings and real property. OMB instructs Federal awarding agencies to interpret the term ‘‘infrastructure’’ broadly and consider the description provided in paragraph (c) of this section as illustrative and not exhaustive. However, OMB then directs agencies to consider certain criteria when determining if a particular project constitutes ‘‘infrastructure.’’ These include whether the project will serve a public function, including whether the project is publicly owned and operated, privately operated on behalf of the public, or is a place of public accommodation, as opposed to a project that is privately owned and not open to the public. Waivers and Exemptions A Federal awarding agency may issue a waiver to the application of the Buy America Preference. The agency notes three types of waivers: Public Interest Waiver: May be applied if the Buy America Preference would be inconsistent with the public interest. Nonavailability Waiver: May be applied if types of iron, steel, manufactured products, or construction materials are not produced in the United States in sufficient and reasonably available quantities or of a satisfactory quality Unreasonable Cost Waiver: May be applied if the inclusion of iron, steel, manufactured products, or construction materials produced in the United States will increase the cost of the overall project by more than 25 percent Before issuing a waiver, the Federal awarding agency must receive a written request from a non-Federal entity to waive the application of the Buy America Preference. The awarding agency must then “prepare a detailed written explanation,” make the waiver and explanation publicly available, allow a minimum 15-day public comment period, and then submit to OMB for final review. The guidance exempts awards expenditures for financial assistance made in anticipation of or response to an event or events that qualify as an ‘‘emergency’’ or ‘‘major disaster.” Public Comment Period OMB has provided only 30 days to comment on the new standard.  NAHB will submit comments as we believe that, under OMB’s proposal as written, virtually all housing development could be excluded from the standard. We have strongly urged HUD to exempt single-family and multifamily affordable housing projects from BABA mandates. However, NAHB remains concerned that the “built in America” standards may stall road and utility projects funded by CDBG or HOME that are needed to allow housing development to take place. Related ‹ Housing Affordability Hits Record Low but Turning Point Lies AheadTags: baba, bipartisan infrastructure law, brass, build america buy america, Building Materials, cement, concrete, copper, drywall, fiber optic cable, glass, inflation, infrastructure investment and jobs act, iron, lumber, materials shortage, millwork, nickel, producer prices, pvc, shortage, softwood lumber, steel, tin, windows

OMB Proposes Standards on Building Materials Made in America2023-02-10T12:23:37-06:00

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