W&M Requests Energy Information Administration Analysis of Energy Tax Provisions

On July 26, 2010, Chairman Levin released a discussion draft of legislation, the Domestic Manufacturing and Energy Jobs Act of 2010. In advance of Committee action on this bill, I would appreciate the Energy Information Administration's assistance in analyzing the potential impact of the following provisions of this bill:

• Manufacturers of energy-efficient appliances (Section 102 of the bill): The proposal would extend the existing tax credits for domestic manufacturers of energy-efficient appliances for three years (through the end of 2013) and would increase the energy-efficiency criteria of appliances that these manufacturers must make in order to be eligible for these tax credits.

• Extension of placed-in-service dates for offshore wind and geothermal facilities (Section 202 of the bill): The proposal would conform the placed-in-service date for geothermal energy facilities and offshore wind facilities under the thirty percent (30%) investment tax credit with the placed-in-service date for solar facilities (i.e., through 2016). Under current law, this tax credit is scheduled to expire at the end of 2013 (although geothermal energy facilities would continue to benefit from a ten percent (10%) investment tax credit thereafter).

• Additional allocation of Clean Renewable Energy Bonds (CREBs) (Section 203 of the bill): The proposal would provide an additional $3.5 billion allocation of Clean Renewable Energy Bonds (CREBs) for public power providers and rural electric cooperatives. This $3.5 billion allocation would be allocated 60% to public power providers and 40% to rural electric cooperatives. In addition, the proposal would expand the types of property that can be financed with CREBs to include energy storage systems and certain biogas equipment.

• Home Energy Conservation Bonds (Section 301 of the bill): The proposal would provide a $2.4 billion allocation of Home Energy Conservation Bonds ("HECBs"). HECBs would be tax credit bonds that provide States and large municipalities with interest-free funds to capitalize long-term programs that provide consumers with low-interest loans and grants for energy-efficiency improvements to existing homes.

• Investment tax credits for consumers of heavy natural gas and heavy hybrid/all-electric vehicles (Section 401 of the bill): The proposal would provide tax incentives to consumers that purchase heavy natural gas vehicles and heavy hybrid vehicles (i.e., vehicles over 8,500 pounds). Under the proposal, consumers would receive a tax credit equal to eighty percent (80%) of the incremental cost (subject to a cap) of purchasing a heavy natural gas vehicle or a heavy hybrid vehicle relative to a comparable gasoline or diesel fuel motor vehicle. In the case of 90/10 mixed fuel vehicles and 65/35 mixed-fuel vehicles, taxpayers would qualify for a reduced tax credit -- ninety percent (90%) of the otherwise allowable credit in the case of a 90/10 mixed-fuel vehicle and sixty-five percent (65%) of the otherwise allowable credit in the case of a 65/35 mixed-fuel vehicle.

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  1. Tax Credit for heavy natural gas vehicles and heavy hybrid vehicles: There are two types of mixed-fuel vehicles under the bill: (1) 65/35 mixed fuel vehicles and (2) 90/10 mixed fuel vehicles. 65/35 mixed fuel vehicles are vehicles that operate using at least 65% compressed or liquefied natural gas and not more than 35% petroleum-based fuel. 90/10 mixed fuel vehicles are vehicles that operate using at least 90% compressed or liquefied natural gas and not more than 10% petroleum-based fuel. In the case of hybrid vehicles, all-natural gas vehicles, and mixed-fuel vehicles, the vehicle must have a gross vehicle weight rating of more than 8,500 pounds to be eligible for the credit.

  2. Manufacturers of energy-efficient appliances: Applies to three types of appliances: (1) dishwashers; (2) clothes washers; and (3) refrigerators. For the capped categories below (labeled "CAPPED"), the total aggregate tax credits that may be claimed by any taxpayer will be limited to $75 million. However, there is no limit on the tax credits that may be claimed for the uncapped categories below (labeled "UNCAPPED")

   

  a. Dishwashers:

   

  i. CAPPED: $25 in the case of a dishwasher which is manufactured in calendar year 2011 and which uses no more than 307 kilowatt hours per year and 5.0 gallons per cycle (5.5 gallons per cycle for dishwashers designed for greater than 12 place settings);

  ii. CAPPED: $50 in the case of a dishwasher which is manufactured in calendar year 2011, 2012, or 2013 and which uses no more than 295 kilowatt hours per year and 4.25 gallons per cycle (4.75 gallons per cycle for dishwashers designed for greater than 12 place settings);

  iii. CAPPED: $75 in the case of a dishwasher which is manufactured in calendar year 2011, 2012, or 2013 and which uses no more than 280 kilowatt hours per year and 4 gallons per cycle (4.5 gallons per cycle for dishwashers designed for greater than 12 place settings).

   

  b. Clothes Washers:

   

  i. CAPPED: $175 per appliance in the case of a top-loading clothes washer manufactured in calendar year 2011 which meets or exceeds a 2.2 modified energy factor and does not exceed a 4.5 water consumption factor.

  ii. UNCAPPED: $225 per appliance in the case of a clothes washer manufactured in calendar year 2011, 2012, or 2013 which either (1) is a top-loading clothes washer and which meets or exceeds a 2.4 modified energy factor and does not exceed a 4.2 water consumption factor or (2) which is a front-loading clothes washer and which meets or exceeds a 2.8 modified energy factor and does not exceed a 3.5 water consumption factor.

   

  c. Refrigerators:

   

  i. CAPPED: $150 per appliance in the case of a refrigerator manufactured in calendar year 2011, 2012 or 2013 which consumes at least 30% less energy than the 2001 energy conservation standards.

  ii. UNCAPPED: $200 per appliance in the case of a refrigerator manufactured in 2011, 2012, or 2013 which consumes at least 35% less energy than the 2001 energy conservation standards.

  3. Clean Renewable Energy Bonds: Clean Renewable Energy Bonds are federally-subsidized bonds. Issuers of these bonds receive a federal subsidy equal to 70% of the interest expense on these bonds (calculated looking at an average interest rate determined by the Treasury Department). The national allocation of $3.5 billion is allocated among public power providers and rural electric cooperatives through an application process that is administered by the U.S. Treasury Department. Under the proposal, 60% of the $3.5 billion would be set aside for public power providers and 40% would be set aside for rural electric cooperatives.

  4. Home Energy Conservation Bonds: Home Energy Conservation Bonds are federally-subsidized bonds. Issuers of these bonds receive a federal subsidy equal to 100% of the interest expense on these bonds (calculated looking at an average interest rate determined by the Treasury Department). The national allocation of $2.4 billion is allocated among the States in proportion to the population of the States, with a suballocation to any municipality or county that has a population of more than 450,000. These bonds will capitalize pools of funds to make low-interest loans and grants to homeowners.

  The funds can be used for low-interest loans and grants to achieve at least a 20% reduction in household energy consumption.

• In the case of improvements that will yield a 20% reduction in total household energy consumption related to heating, cooling, lighting and appliances, the maximum loan or grant is $5,000. The loan can be used for property that meets (at a minimum) the requirements of the Water Sense program or the Energy Star Program. For property that only meets the standards of Water Sense, the loan or grant for this type of property (in the aggregate) cannot exceed $500.

• In the case of improvements that will yield a 30% reduction in total household energy consumption (as defined above), the maximum loan or grant is $8,000. Same limitations as above.

• In the case of improvements that will yield a 40% reduction in total household energy consumption (as defined above), the maximum loan or grant is $12,000. Same limitations as above.

• At least 20% of all the funds raised by the State or locality must be set aside for loans and grants to individuals with income that is 100% or less of area median gross income. At least 10% of all the funds raised by the State or locality must be set aside for grants to these low-income households. The rate of interest on loans for these households cannot exceed the applicable Federal rate over 100 basis points.

  The remaining 80% of the funds raised by the State or locality can be used for loans that have a rate of interest not to exceed the applicable Federal rate.