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While many of us rang in the new year with a champagne toast, Washington lawmakers were busy at work attempting to iron out a deal that would prevent the nation from falling over the so-called “fiscal cliff,” a term used to refer to the combined Dec. 31, 2012, expiration of certain tax breaks and the automatic Jan. 1, 2013, launch of $1.2 trillion in spending cuts over the next decade, pending the proposal of an alternative plan by a federally appointed Super Committee.
By New Year’s Day, legislators had succeeded in resolving some measures while deferring others to a new decision timeframe this March. So what does it all mean for the electrical products industry and the electrical contractors who support it?
“With our national public debt increasing from $15.1 to $16.4 trillion in the past year, our deficit officially matched our total gross domestic product and is actually poised to grow faster than our economy,” said Steve Rosenstock, senior manager of energy solutions for Edison Electric Institute (EEI), Washington, D.C. Despite this troubling reality, he said that legislation remains very supportive of energy-efficient products and projects as well as the channels that drive them. Below, Rosenstock highlights how some key tax credits, rebates, incentives, and other energy-related provisions were or were not affected by the fiscal cliff deal, as shared in the recently updated American Taxpayer Relief Act of 2012.
Utility rebates and demand-side management programs
“Utility programs are decided at the state level and typically run separately from federal incentives, so it’s likely that utility incentives are locked in for 2013, even with the extended or revised federal incentives determined for 2013,” he said. “Rebates might change in 2013 based on rising minimum efficiency standards for appliances and buildings, but funding should still be available for those products exceeding the standards.”
Section 401: Extension of credit for energy-efficient existing homes
According to Rosenstock, this federal tax credit—a “lifetime” tax credit that was first established as part of the Energy Policy Act of 2005—expired on Dec. 31, 2011, and now has been extended to Dec. 31, 2013. The tax credit is 10 percent of the cost up to a lifetime cap of $500. Certain appliances are assigned certain tax credits (e.g., high-efficiency central heat pumps receive a $300 tax credit).
Section 402: Extension of credit for alternative-fuel vehicle refueling property
This federal tax credit also expired on Dec. 31, 2011, and has been extended to Dec. 31, 2013. The tax credit for residential electric vehicle chargers is 30 percent of the installed cost up to $1,000. For commercial/industrial properties, the federal tax credit is 30 percent of the installed cost up to $30,000. Both tax credits are based on a per-location basis, not on a per-charger basis.
Section 408: Extension of credit for energy-efficient new homes
This tax credit for home builders expired on Dec. 31, 2011, and has been extended until Dec. 31, 2013, with one significant change: Under the previous provisions, home builders had to build homes that were 50 percent more energy-efficient than the 2003 version of the International Energy Conservation Code (IECC). Under the extension, the new homes have to be 50 percent more efficient than the 2006 IECC (plus supplements).
Opportunities in solar and wind turbine technology
In addition to state incentives and the federal energy investment tax credit, which allows purchasers of commercial solar-power systems to take a tax credit equal to 30 percent of the cost of the system through 2016, those who purchase and install such systems have the ability to use renewed 50 percent first-year bonus depreciation allowances that expire on Dec. 31, 2013. Lucrative tax credits on wind turbines (2.2 cents per kilowatt-hour for 10 years) that expired on Dec. 31, 2012, were also extended through Dec. 31, 2013, and language regarding eligibility requirements was changed from the term “placed in service” to “under construction,” “making it a good time to break ground on these projects in 2013,” Rosenstock said.
The future? With three more financial situations—the sequester, the debt ceiling limit, and the continuing resolution expiration—all coming to a head soon, Rosenstock advises electrical contractors with government contracts to prepare for the possibility of delays, budget cuts or even a shutdown should legislators decide to go in that direction.
“But despite the ongoing economic confusion and federal deliberations,” he said, “we’re still in a period of great opportunity for energy-efficient products/projects and electrical contractor services.”