Tax credit for home builders.

• Author: Ackerman, Joel

Home builders around the country have a new incentive to build energy-efficient homes. Last year, President Bush signed into law the U.S. Energy Policy Act of 2005 (EPA '05), which included a myriad of energy-related provisions regarding coal, natural gas, renewable energy and energy efficiency and distribution. Also included was a tax credit under Sec. 45L--the new energy efficient home credit--available to eligible contractors. Depending on the energy savings achieved, the credit is either $1,000 or $2,000 per home.

According to Sec. 45L, a home qualifies for the credit if."

* It is located in the U.S.;

* Its construction is substantially completed after Aug. 8, 2005;

* It meets the statutory energy-saving requirements; and

* It is acquired from an eligible contractor in either 2006 or 2007, for use as a residence.

IRS Guidance

The Service issued IR News Release 2006-32 and Notices 2006-27 and -28 to provide guidance on how homebuilders can qualify newly constructed homes for the credit. Among other things, it provides information about the certification process that a builder must complete to qualify for the credit, and a public list of software programs that may be used by home builders in calculating energy consumption to obtain the proper certification.

Energy savings: In general, to meet the energy-saving requirements, a manufactured home must be certified to provide a level of energy consumption for heating and cooling that is at least 30% to 50% (50% for other homes) below that of a comparable home constructed in accordance with current energy standards. Also, it must have exterior improvements providing a level of heating and cooling energy consumption at least 10% below that of a comparable home. For manufactured homes that cannot meet the 50% threshold, the credit is reduced from $2,000 to $1,000 if a 30% energy-efficiency standard is met.

Certification: An eligible contractor must obtain a manufactured home certification from an eligible certifier before claiming the $2,000 energy-efficient home credit; see Sec. 45L(c) and Notices 2006-27 and -28. A...