$1,500 Tax Credit for HVAC
Coming soon, more information about the government’s $1,500 Tax Credit. Summary of Energy and Efficiency Credits in H.R. 1
Updated February 23, 2009
“American Recovery and Reinvestment Act of 2009”
Signed into law February 17, 2009
On Tuesday, February 17, 2009, President Obama signed into law H.R. 1, the American
Recovery and Reinvestment Act of 2009 (version 8), which is comprised of two primary
parts. Division A is a series of appropriation provisions while Division B is primarily tax
and other provisions and includes specific incentives for residential high-efficiency
HVAC equipment. Both divisions may have implications for HVACR wholesale
distributors so HARDI has prepared the following summary to serve as a quick reference
guide to this massive bill. Please note, however, that HARDI offers only our
interpretation of the legislation so members are strongly advised to have retained
accounting or legal counsel review the legislative text and tax code amendments before
taking any action.
Division A- Appropriations
Title III: Department of Defense
Appropriates over $3 billion to the U.S. Armed Forces to invest in the energy efficiency
of Department of Defense facilities.
Title IV: Department of Energy
Appropriates nearly $17 billion to the Energy Efficiency and Renewable Energy division
of the Department of Energy for funding, among other things, Energy Efficiency and
Conservation Block Grants and $5 billion for the Weatherization Assistance Program.
• Section 407: Increases the qualifying level for weatherization assistance and
nearly triples the funding per unit dwelling from $2,500 to $6,500.
• Section 410: Directs the Secretary of Energy to make additional state energy
grants to fund utility energy efficiency incentive programs and to assist in the
state adoption and implementation of residential building codes, 2009 IECC and
commercial codes, ASHRAE 90.1-2007. The Secretary is also directed to use
funds to assist with energy efficiency retrofits of state buildings.
Title V: Financial Services and General Government Department of Treasury
Appropriates nearly $4.5 billion to convert GSA facilities to High Performance Green
Buildings. This title also increases funding for Small Business Administration loans.
• Section 501: Reduces or temporarily eliminates fees associated with the 504
Loan Program and increases the SBA’s lending limits.
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The Heating, Airconditioning & Refrigeration Distributors International
3455 Mill Run Drive Suite 820 Columbus, OH 43026-7578
Phone: (614) 345-4328 Fax: (614) 345-9161 www.hardinet.org hardimail@hardinet.org
• Section 502: Permits the SBA to guarantee up to 90% of qualifying small
business loans made by eligible lenders for 12 months after the bill’s enactment.
• Section 504: Provides refinancing options for Community Development lending
which would apply to financed purchases or expansions of land, buildings, or
equipment.
• Section 506: Does not appropriate, but provides authority to the Administrator to
appropriate, if possible, to provide loans to small businesses that already have a
qualifying loan and are experience severe financial hardship.
Title VII: Interior, Environment, and Related Agencies
Appropriates approximately $3 billion for the training of adult workers and youth, $750
million of which is targeted specifically for careers in energy efficiency and renewable
energies.
Title VIII: Departments of Labor, Health and Human Services, and Education
Appropriates nearly $4.5 billion to convert GSA facilities to High Performance Green
Buildings. This title also increases funding for Small Business Administration loans.
Title XII: Transportation and Housing and Urban Development
Appropriates $250 million to Housing and Urban Development for energy retrofits and
green improvements to assisted housing.
Division B- Tax, Unemployment, Health, State Fiscal Relief and Other Provisions
Subtitle B, Energy Incentives, Part III:
• Section 1112: Quadruples limits on qualified energy conservation bonds to $3.2
billion.
• Section 1121 Extension and Modification of Credit for Non-Business Energy
Property (for residential replacements only)
o Increases existing residential efficiency credit from $500 to $1,500 for all
of 2009 (retroactive) and 2010. Up to 30% of qualified energy efficiency
upgrades to a cap of $1,500 to a primary residence is eligible for a credit.
o Eliminates lifetime limit meaning that any of the $500 credits claimed in
2006 or 2007 do not count against the $1,500 credit cap in 2009 and 2010.
o Eliminates product-specific credit caps.
Qualifying HVAC and plumbing equipment is listed on the following page, courtesy of
the Air Conditioning Contractors of America:
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The Heating, Airconditioning & Refrigeration Distributors International
3455 Mill Run Drive Suite 820 Columbus, OH 43026-7578
Phone: (614) 345-4328 Fax: (614) 345-9161 www.hardinet.org hardimail@hardinet.org
Qualifying Equipment for Tax Credits
Credits Limited to 30% of Installed Costs (up to $1,500) in the tax years 2009 and
2010.
Equipment Minimum Energy Efficiency Standard to Qualify
Electric Air Source Heat Pumps Split Heat Pumps Package Heat Pumps
15 SEER 14 SEER
12.5 EER 12 EER
8.5 HSPF 8 HSPF
Package
Central Air Conditioners Split System System
16 SEER 14 SEER
13 EER 12 EER
Geothermal Heat Pump Closed Loop Open Loop Direct Expansion
(30% of total installation eligible, no dollar cap*) 14.1 EER 16.2 EER 15 EER
3.3 COP 3.6 COP 3.5 COP
*Solar electric, solar hot water, and wind also eligible,
including new construction
Natural Gas Furnace 95% AFUE
Natural Gas Hot Water Boiler 90% AFUE
Propane Furnace 95% AFUE
Propane Hot Water Boiler 90% AFUE
Oil Furnace 90% AFUE
Oil Hot Water Boiler 90% AFUE
Gas, Oil or Propane Water Heaters .82 Energy Factor
90% Thermal Efficiency
Electric Heat Pump Hot Water Heater 2.0 Energy Factor
75% Thermal
Efficiency as
measured using a
Wood Stoves lower heating value.
Advanced Main Air Circulating Fan (ECMs) No more than 2% of furnace total energy use
o Qualifying levels for insulation must meet 2009 IECC
o Equipment installed after date of enactment must meet the above standards
to qualify while previous-qualifying equipment installed prior to
enactment also remains eligible
• Section 1122: Eliminates dollar cap and establishes credit for full 30% of
installation costs for solar electric and solar water, wind, and geothermal heat
pumps.
Here are some additional sections of interest and some that you should have your
tax professional review:
Subtitle C, Tax Incentives for Businesses:
• Sections 1201 and 1202: Increase expensing limits and bonus depreciation
credits
• Section 1211: Permits a five-year carry back of operating losses
• Section 1221: Provides tax incentives for hiring unemployed veterans and
disconnected youth
• Section 1241: Establishes special rules for qualified small business stock
• Section 1251: Modifications to S-Corporation regulations and tax policy
• Sections 1261 and 1262: Changes to treatment of certain ownership changes
• Section 1511: One-year delay in withholding tax on government contractors
• Section 1521: $11 billion in 2009 and 2010 for qualified school construction
bonds
• Section 1602: Incentives for upgrades to low-income housing
• Section 1603: Grants in lieu of tax credits for qualified energy properties such as
wind, solar, and geothermal
NOTE: The above sections of note and their descriptions are the result of a brief and
initial study by HARDI. We encourage any comments or corrections found after closer
study.
For questions or more information on these incentives or other government affairs,
contact HARDI’s Government Relations Committee at gr@hardinet.org or call (888)
253-2128.
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The Heating, Airconditioning & Refrigeration Distributors International
3455 Mill Run Drive Suite 820 Columbus, OH 43026-7578
Phone: (614) 345-4328 Fax: (614) 345-9161 www.hardinet.org hardimail@hardinet.org
