Manufacturers' Energy Efficient Appliance Credit
Tax Relief and Job Creation Act of 2010
Act §709 – Modification and Extension of Energy Efficient Appliance Credit for Appliances Produced After 2010
In General
The Tax Relief and Job Creation Act of 2010 modifies and extends the energy efficient appliance credit for certain dishwashers, clothes washers, and refrigerators manufactured after December 31, 2010. Under Code §45M(a)(1), the credit may be claimed as part of the Code §38 general business credit for each type of qualified energy efficient appliance produced by the taxpayer during the 2011 calendar year ending with or within the taxpayer’s taxable year.
Credit per Unit Produced Based on Energy Efficiency
The credit may be claimed on each qualifying appliance produced by the taxpayer and is based on the type of appliance, its energy efficiency, and for dishwashers and clothes washers, the amount of water it consumes. The total credit for any type of qualifying appliance is the applicable amount listed below multiplied by the eligible production for such type. §45M(a)(2). For purposes of this code section, the term “produced” includes manufactured. §45M(f)(7).
Dishwashers
- $25 in the case of a dishwasher which is manufactured in calendar year 2011 and which uses no more than 307 kilowatt hours per year and 5.0 gallons per cycle (5.5 gallons per cycle for dishwashers designed for greater than 12 place settings). §45M(b)(1)(C)
- $50 in the case of a dishwasher which is manufactured in calendar year 2011 and which uses no more than 295 kilowatt hours per year and 4.25 gallons per cycle (4.75 gallons per cycle for dishwashers designed for greater than 12 place settings). §45M(b)(1)(D)
- $75 in the case of a dishwasher which is manufactured in calendar year 2011 and which uses no more than 280 kilowatt hours per year and 4 gallons per cycle (4.5 gallons per cycle for dishwashers designed for greater than 12 place settings). §45M(b)(1)(E)
The term “dishwasher” means a residential dishwasher subject to the energy conservation standards established by the Department of Energy. §45M(f)(2)
Clothes washers
- $175 in the case of a top-loading clothes washer manufactured in calendar year 2011 which meets or exceeds a 2.2 modified energy factor and does not exceed a 4.5 water consumption factor. §45M(b)(2)(E)
- $225 in the case of a clothes washer manufactured in calendar year 2011—(i) which is a top-loading clothes washer and which meets or exceeds a 2.4 modified energy factor and does not exceed a 4.2 water consumption factor, or (ii) which is a front-loading clothes washer and which meets or exceeds a 2.8 modified energy factor and does not exceed a 3.5 water consumption factor. §45M(b)(2)(F)
The term “clothes washer” means a residential model clothes washer, including a commercial residential style coin operated washer. I.R.C. §45M(f)(3). The term “top-loading clothes washer” means a clothes washer that has the clothes container compartment access located on the top of the machine and that operates on a vertical axis. §45M(f)(4)
Refrigerators
The credit for refrigerators is based on their energy savings relative to the energy conservation standards promulgated by the Department of Energy that took effect on July 1, 2001. §45M(f)(8)
- $150 in the case of a refrigerator manufactured in calendar year 2011 which consumes at least 30% less energy than the 2001 energy conservation standards. §45M(b)(3)(E)
- $200 in the case of a refrigerator manufactured in calendar year 2011 which consumes at least 35% less energy than the 2001 energy conservation standards. §45M(b)(3)(F)
The term “refrigerator” means a residential model automatic defrost refrigerator-freezer that has an internal volume of at least 16.5 cubic feet. §45M(f)(5)
Eligible Production
The production in a calendar year eligible for the credit includes only the excess of the number of appliances of such type that are produced during such calendar year in the United States over the average number of appliances of such type that were produced by the taxpayer (or any predecessor) in the United States during the preceding 2-calendar year period. §45M(c)
Limitations
The following limitations on the credit apply to taxable years beginning after December 31, 2010:
Dollar Limitation
The aggregate amount of credit allowed with respect to a taxpayer for any taxable year shall not exceed $25 million reduced by the amount of the credit allowed to the taxpayer (or any predecessor) for all prior taxable years beginning after December 31, 2010. §45M(e)(1). The $25 million dollar limitation shall not be taken into account for refrigerators eligible for the $200 credit and clothes washers eligible for the $225 credit. §45M(e)(2)
4% Gross Receipts Limitation
The credit with respect to a taxpayer for the taxable year shall not exceed an amount equal to 4% of the average annual gross receipts of the taxpayer for the 3 taxable years preceding the taxable year in which the credit is determined. §45M(e)(3)
For purposes of the 4% gross receipts limitation:
- All controlled groups of corporations, and partnerships or proprietorships that are under common control, that are treated as a single employer under §52(a) or (b) are also treated as a single producer for gross receipts limitation purposes. §45M(e)(4) & §448(c)(2)
- If the entity was not in existence for the entire preceding 3 taxable years, the percentage of average annual gross receipts are to be applied on the basis of the period during which such entity was in existence. §45M(e)(4) & §448(c)(3)(A)
- Gross receipts for any taxable year of less than 12 months are to be annualized by multiplying the gross receipts for the short period by 12 and dividing the result by the number of months in the short period. §45M(e)(4) & §448(c)(3)(B)
- Gross receipts for any taxable year are to be reduced by returns and allowances made during such year. §45M(e)(4) & §448(c)(3)(C)
- The preceding 3 year period includes gross receipts of the taxpayer or any predecessor to the taxpayer. §45M(e)(4) & §448(c)(3)(D)
Definition of Controlled Group
Generally, controlled groups of corporations, and partnerships or proprietorships which are under common control that are treated as single employers under §52(a) or (b) are treated as single producers for purposes of the credit. §45M(g)(2)(A). Foreign corporations are not considered excluded members of a controlled group of corporations. §45M(g)(2)(B)
Verification
No amount of credit will be allowed with respect to which a taxpayer has not submitted such information or certification as the Secretary, in consultation with the Secretary of Energy, determines to be necessary. I.R.C. §45M(g)(3)
Carryback and Carryforward Rules
While Code §39 generally provides for a 1 year carryback and 20 year carryforward for current year business credits that exceed the limitation of Code §38(c), no portion of the unused business credit can be carried back to a tax year before the first year for which that credit is allowed. §§39(a) & (d)
Effective Date
Act Sec. 709 applies to qualifying energy efficient appliances produced after December 31, 2010.
