This is an excerpt from EERE Network News, a weekly electronic newsletter.

February 09, 2005

2006 Budget Includes Tax Incentives for Renewables and Clean Vehicles

President Bush's proposed federal budget for fiscal year 2006 includes tax incentives totaling $3.6 billion through 2010 to spur the use of renewable energy and energy-efficient technologies. The Bush Administration proposes extending the tax credit for producing electricity from wind, biomass, and landfill gas through January 1, 2008, while excluding electricity produced from agricultural livestock wastes. The Administration proposes a partial credit—running from 2006 through the end of 2008—for the use of biomass sources that are not specifically grown as a power source (so-called "open-loop" biomass) when co-fired with coal in a coal plant. The Administration also proposes a 10-percent investment credit for businesses that install a combined heat and power system that produces more than 50 kilowatts of power or more than 67 horsepower, if placed in service between December 31, 2004, and January 1, 2010.

For individuals, the Administration proposes a tax credit for the purchase of residential solar energy systems, equal to 15 percent of the cost of the equipment and its installation, up to a maximum of $2,000. The credit would apply to photovoltaic equipment placed in service after December 31, 2004, and before January 1, 2010, and to solar water heating equipment placed in service after December 31, 2004, and before January 1, 2008.

Buyers of hybrid electric vehicles would benefit under a proposal to extend the current $4,000 federal tax credit through January 1, 2009. However, the Administration proposes adjusting the credit based on the percentage of the vehicle's power provided by the energy storage system and based on the amount that the vehicle's fuel economy exceeds the 2000 model year fuel economy in city driving. The Administration also proposes a credit of up to $8,000 for fuel cell vehicles purchased before January 1, 2013, with adjustments again based on the vehicle's fuel economy. See pages 288 and 289 (PDF pages 300 and 301) of "Analytical Perspectives" (PDF 2.6 MB), a detailed budget document. Download Acrobat Reader.