Congress extends Sec. 45L "Energy Efficient Homes" tax credit.

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Congress, in its end-of-year fiscal year spending bill signed by President Obama just before Christmas, extended a number of tax deductions and credits that had expired at the end of calendar year 2014. Among the tax "extenders," as they are called, was Sec.45L of the tax code that provides a credit of $2,000 for builders of new homes that are "energy efficient." "Energy efficient" is defined in the tax credit as having 50 percent of the heating and cooling energy consumption of a home built to meet the baseline of the International Energy Conservation Code (IECC), and having heating, ventilating and air conditioning (HVAC) equipment that meets the minimums established by the Department of Energy (DOE) as of the date of completion of construction. The credit also requires that at least one-fifth of the 50-percent less energy use must come from building envelope improvements. Because the IECC derives most of its efficiency gains from building envelope requirements, in effect, the credit requires that the new residential unit must be 20-percent more efficient than the baseline IECC, and meet current minimum DOE HVAC equipment standards. Since the 2012 and 2015 IECC are both approximately 30-percent more efficient than the baseline IECC, any home that meets the 2012 or 2015 IECC, and has currently available HVAC equipment, will very likely qualify for the $2,000 tax credit, which goes directly to the home builder. For states that have not yet adopted the 2012 or 2015 IECC, the extension of this tax credit might be an incentive for home builders to support updating the code to the 2012 or 2015 IECC. Where states have not updated their energy code to the current code, the ICC Evaluation Service (ICC-ES) can assist manufacturers in demonstrating that their products can achieve building envelope efficiency goals required for builders to earn this very valuable tax credit. ICC-ES may also be able to assist manufacturers in showing compliance with water heater or HVAC system requirements. The 45L credit was extended until Dec. 31, 2016, which is a two-year extension from its expiration on Dec. 31, 2014. It applies retroactively to homes built in 2015 that meet the requirements of the credit, as well as prospectively to homes built in 2016 that meet the requirements.