Manufacturers’ Energy Efficient Appliance Credit
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.
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).
The term “dishwasher” means a residential dishwasher subject to the energy conservation standards established by the Department of Energy. §45M(f)(2)
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)
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)
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)
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)
The following limitations on the credit apply to taxable years beginning after December 31, 2010:
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)
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:
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)
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)
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)
Act Sec. 709 applies to qualifying energy efficient appliances produced after December 31, 2010.
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