Energy Tax Incentives for Businesses

Part of the Economic Recovery Act passed in October extended two energy-related provisions for businesses and added a tax-free employee benefit.  Here is a rundown on those provisions:

• Contractor Efficient Home Credit - An eligible contractor may claim a business credit for each qualified new energy-efficient home that the contractor constructs and which is acquired by a person from the contractor for use as a residence.  The credit is either $2,000 (for a 50% energy reduction in energy usage) or $1,000 (for a 30% energy reduction in energy usage).  This credit has been extended through 2009.

• Energy-Efficient Commercial Building Property - A deduction is allowed in an amount equal to the cost of “energy-efficient commercial building property” placed in service during the tax year.  The maximum deduction for any building for any tax year is the excess (if any) of $1.80 multiplied by the square footage of the building, less the aggregate amount of the deduction for the building for all earlier tax years.  This credit is extended through 2013.

• Bicycle Reimbursements Added to Employer Fringe Benefits – Employers are able to provide certain tax-free “fringe benefits” to their employees.  “Qualified bicycle commuting reimbursement” has been added to the list of qualified transportation fringe benefits.  Up to $20 per month of employer tax-free reimbursement is allowed for reasonable expenses incurred by the employee during that calendar year for the purchase of a bicycle and bicycle improvements, and repair and storage if the bicycle is regularly used for travel between the employee's residence and place of employment. 

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