Tax Incentives

legislation designed to improve energy production, transportation, and efficiency, signed into law on August 10, 2005. Some of the bill's most important provisions include

1. Deduction for energy-efficient buildings. A new deduction was instituted for expenses incurred to improve the energy efficiency of existing or new buildings. This applies to improvements in lighting, heating, cooling, ventilation, and hot water systems.
2. Tax credit for building energy-efficient homes. Taxpayers may claim a lifetime nonrefundable credit of up to $500 for making qualifying energy-saving improvements to an existing home. This includes solar water heaters, solar panels to produce electricity, fuel cell property, and energy-efficient air conditioners, heat pumps, and other equipment.
3. Tax credits for alternative power vehicles. Credits were introduced for fuel cell, lean burn technology, hybrid, and other alternative fuel motor vehicles.
4. Energy-related cost recovery provisions. These include the ability of oil and gas producers to use percentage depletion under the independent producer exception, expensing for investments that increase capacity of oil refineries, two-year amortization of geological costs from domestic oil and gas exploration and seven-year write-off rules for new natural gas gathering lines.
5. Business tax credits. Several new business tax credits were created for manufacturing energy-efficient appliances, for fuel cell power plants, for microturbine power plants, for small agribiodiesel producers, and for ethanol producers. Other new credits created were for hydropower, geothermal and solar power, advanced coal and gasification projects.