Energy Tax Breaks

In 2010, Congress had been expected to pass comprehensive energy legislation including new and enhanced tax incentives; however, for a number of reasons, a specific energy bill did not pass. The Tax Relief Act of 2010 did extend some energy tax breaks for businesses and also extends, but modifies, a popular energy tax break for individuals.

Businesses: For businesses, one of the most valuable energy incentives is the Code Sec. 1603 cash grant in lieu of a tax credit program. This incentive encourages the development of alternative energy sources, such as wind energy. Other business energy incentives extended by the Tax Relief Act of 2010 include excise tax and other credits for alternative fuels, percentage depletion for oil and gas from marginal wells, and other targeted incentives.

Individuals: Individuals who made energy efficiency improvements to their homes in 2009 or 2010 are likely familiar with the Code Sec. 25C energy tax credit. This credit rewards individuals who install energy efficient furnaces or add insulation or make other improvements to reduce energy usage. The Tax Relief Act of 2010 extends the credit through 2011 but reduces some of its benefits.