Frequently Asked Questions

How can I earn a $2,000 Per Home Tax Credit?

Home builders can earn a $2,000 IRS Home Energy Tax Credit for each qualifying new house or dwelling unit they sell in 2006, 2007 or 2008. There is no limit on the number of houses that an individual builder can submit.  The tax credits are subtracted directly from your tax liability not your taxable income. Testing costs can be deducted as a business expense. BAM has created the Energy Payback Incentive (EPI) program ~ a network of certified testers that can test your homes to see if they qualify for the tax credit. Almost all single-family homes built to the Minnesota Energy Code will pass and EPI will pre-screen your houses.  Testing is done right before closing or even after homeowners have moved in so you can even qualify houses you sold in 2006.  Unless Congress renews the tax credit program, the tax credits will sunset on December 31, 2008.  EPI only accepts prepayment by Visa or Mastercard credit cards before any testing is performed.

Does Every Company Qualify?

S-corps and some partnerships may not qualify for the entire tax credit. BAM recommends that you consult with your tax advisor and confirm that a Home Energy Tax Credit is beneficial to your business model.

How Do I Participate?

Call EPI at 651-646-7959 or 800-654-7783 and answer a few quick questions to see if your homes are good candidates for the tax credit and to start in the program. Homes sold in 2006 that are tested and qualify after tax day can still be tested and used on your 2007 or 2008 return.

What Types of Houses Are Likely To Pass?

Due to Minnesota’s strict energy code, almost all single-family homes that meet Minnesota air tightness standards will pass.  EPI has tested hundreds of homes already and we know what will pass.  The risk is gone!  If your homes have the following characteristics call EPI today to set up your first test.

Energy efficient heating systems such as:

• Natural gas or propane furnaces (at least 90% AFUE),
• In-floor heat with natural gas boilers
• In-floor heat with electric boilers ONLY if they are in a small area such as a bathroom.
• Air source heat pumps that switch over to natural gas or propane fired boilers
• Ground source heat pumps
  Call EPI staff to ask about other heating sources/systems.
• Electric resistance whole house heating systems will usually not qualify for a credit.  Ask EPI staff for more details.
• All ductwork in unconditioned spaces (attics, outside walls, under bonus rooms, and underground (transite) must be sealed with mastic or UL 181 tape and insulated.
• Insulation levels and window efficiencies must meet Minnesota energy code minimums
• Air tightness levels must meet Minnesota industry standards.
• Mechanical ventilation system: air-to-air-exchanger or continuously exhausting fans.
• Houses must be built in Minnesota, Wisconsin, Iowa or North Dakota to Minnesota Energy Code standards.

Will Townhomes Qualify?

Some townhomes may also qualify for the home energy tax credit if they have a sealed air barrier, mechanical ventilation and high efficiency furnaces.  These requirements are more stringent than the existing energy code requirements for multi-family construction.  Call EPI staff to confirm.

Why Should I Pay Money To Test My Homes?

Ask your tax advisor!  The home energy tax credits reduce the amount of tax a home builder owes the IRS, dollar for dollar.  Pay EPI now and get a 100 – 125% short-term return on investment or pay the IRS later without the chance to reduce the amount of tax you owe.  Each $2,000 energy tax credit is subtracted directly off of your tax liability.  There is no limit on the number of qualified houses you can submit.  If you have more credits than tax liability in a given year you can carry the additional credits for up to 20 years in the future. You also get to deduct the entire cost of the testing as a business expense. Ask EPI staff to e-mail IRS tax form 8908 to you so you can discuss this opportunity with your tax advisor.

How Do I Get a House Tested and Certified?

The following testing and certification process is required by the IRS and EPI to receive the credit. There are very specific rules about who can qualify to be a TESTER and a VERIFIER. EPI has set up a network of qualified people to help you meet the IRS requirements.  You pay EPI and we manage the testers with as little paperwork as possible.  This is truly a no-hassle program that will not disrupt your production schedule.

PHASE 1 TESTING

(Plan Review and Preliminary Software Results)

1. BUILDER calls EPI staff with the address of a house at least 3 weeks before closing or after a homeowner has moved in.
2. EPI staff prescreens the house for eligibility for a tax credit and assigns a TESTER.
3. EPI staff sends the BUILDER a one-page contract and home checklist for each home.  On your first house this information takes approximately 15-25 minutes to complete, less time for additional houses.
4. BUILDER e-mails or faxes a completed home checklist that shows what insulation methods and HVAC equipment were used to build the house.
5. EPI reviews the survey to make sure the home meets energy code and EPI requirements.
6. The BUILDER e-mails their tester a set of plans (Autocad or PDF file) or mails a set of blueprints to their tester.  am on insulation methods and HVAC equipment to EPI.
7. EPI charges the BUILDER’s credit card a non-refundable $300 plan review fee ($500 for non-members). This fee is $50 for a repeat plan (a $250 savings on each home).
8. The EPI TESTER notifies the BUILDER of the results of the plan take off and a preliminary software run assuming Minnesota air tightness and duct leakage standards.

PHASE 2 TESTING (On-Site Tests and Verification)

1. The BUILDER notifies EPI STAFF via e-mail or fax that EPI should with Phase 2 on-site testing.
2. EPI STAFF charges the BUILDER’s credit card a non-refundable $695 Phase 2 Testing Fee.
   Once the closing is scheduled or the BUILDER has arranged a testing date with a homeowner, the BUILDER schedules the EPI TESTER to complete an on-site test.  The TESTER will (1) Perform a blower door inspection to determine the building thermal envelope’s air tightness; (2) Perform a duct blaster test to determine any duct leakage to the outside; (3) Open the attic scuttle to determine the type, depth and quality of attic insulation.  The TESTER reseals the attic scuttle with clear caulk;  and (4) Confirms the ventilation rates and heating and cooling equipment efficiencies.  
3. The EPI TESTER enters the information they collect from the on-site inspections into specifically designed software.
4. The software file and plan is sent to the certified EPI VERIFIER.
5. EPI STAFF forwards the tax credit certificate to the BUILDER after it is certificed by a third party VERIFIER and signed by the TESTER.
6. The BUILDER can deduct the $995 (member rate) or $1195 (non-member rate) testing cost as a business expense and claim a $2,000 Home Energy Tax Credit for each home on IRS Form 8908.

This two-step testing process and fee structure are repeated for each additional house.  Duplicate house plans are discounted $250.  For example, if you submit a repeat plan members pay $745 per house rather than $995 for the entire process.

How much does it cost per house?

EPI only accepts Visa or Mastercard credit card payments for Phase 1 and Phase 2 testing of the Home Energy Tax Credit before the testing is performed. Testing costs can be deducted as a business expense.

Complete Package Required for IRS Home Energy Tax Credit
Phase I & Phase II testing.  Both are required for the credit.
BAM members = $995 per house, $745 per house for repeat plans.
Non-members = $1195 per house, no discount for repeat plans.
If you are a non-member, consider joining one of BAM’s local builder associations www.bamn.org/local.cfm.

Phase 1 Testing includes a plan review and preliminary software test
            Members = $300 per house or townhome unit, $50 for repeat plans.
            Non-Members = $500 per house, no discount for repeat plans.
There is no obligation to move onto Phase 2 Testing if your home “fails” the preliminary software run. Because of EPI’s experience with which houses will pass and stringent screening process this is a no-risk step.

Phase 2 Testing includes an air leakage test, duct leakage test, attic insulation inspection and HVAC equipment inspection, a final software report and the documentation you need to file your tax credit.  Qualifying houses are also certified by a third party verifier.
            Members & non-members = $695 per house, no deductions for repeat plans.

Are There Any Hidden Fees?

Houses that are larger than 5,000 conditioned square feet (including basements, but excluding garages) have to pay an additional plan review fee.  For every 100 square feet over 5,000, EPI charges an additional $100 due to the increased time it takes our testers to do a plan take-off on these custom homes.  So a house with 6,000 conditioned square feet would cost an additional $100 to for the plan review and would cost a total of $1095 to receive a credit (for a BAM member). 

The only other additional fee would occur if the house doesn’t pass the on-site testing due to air leakage in the building envelope or duct leakage that doesn’t meet Minnesota residential standards.  See the next section for more information

What If My House Fails To Qualify?

If a house fails the on-site testing phase you will want to know as a quality assurance step.  Failing the duct leakage test, blower door test, or attic insulation inspection means that you as a builder didn’t get what you paid your subcontractor to do.  Only 2% of the houses that EPI has tested on-site have failed to qualify for a credit during the first on-site test.  These five houses did not meet Minnesota air leakage standards; in all but one case the builder fixed the problem, redid the on-site EPI testing and qualified the homes.  For instance, one house did not pass because the heating and cooling ducts run through the attic were not sealed…anywhere even though the builder called out this code-required step in their contract with the HVAC contractor.  In this house the mechanical contractor fixed the problem and paid for the builder’s on-site test.  In three other examples, serious air barrier breaches were discovered including (1) a chimney chase that was not air sealed ~ which would have likely lead to an ice dam problem and high heating bills for the consumer; (2) missing rigid insulation on a rim joist in a bonus room that had been blown off during a pre-drywall tornado; and (3) unsealed holes in the air barrier between the mechanical room and attic.  These statistics show how well BAM home builders and their subcontractors are building very energy efficient and quality new homes in Minnesota.  Your subcontractors should encourage you to enter the EPI program ~ to prove what a quality job they are giving you!  If your house does not meet the requirements, EPI will not charge you the full $695 which includes the certification and processing fee for the credit.  We will only charge you for the testing fee.

Will Homes That Are Remodeled Qualify?

The tax deduction is not intended for a small addition or remodeling job, but the IRS rules state that a home that is “substantially reconstruction and rehabilitation” can qualify for a credit.  However, the IRS does not define what this means. IRS staff suggests that remodelers not test homes until the IRS releases specific rules on what types of reconstruction and rehabilitation projects might qualify. 

For smaller remodeling jobs the IRS is offering homeowners a deduction on materials that meet Energy Star standards such as insulation, patio doors, windows, etc.  The maximum amount is $500 per homeowner and the credit comes directly to the homeowner.  The homeowner must prove they purchased the materials by keeping their receipts for qualifying purchases. 

For more information see:
 http://www.energystar.gov/index.cfm?c=products.pr_tax_credits#s2
click on “Home Improvements”

For qualifying products see: http://www.energystar.gov/index.cfm?c=products.pr_tax_credits#chart.

Can’t I Test and Certify My Own Homes?

No! The IRS set up a very strict protocol for testing and certifying homes through the Residential Energy Services Network (RESNET). They have a specific protocol for complying with testing and verification
requirements. EPI has contracted with a 3rd party verifier to oversee the testers.  Conservation Services Group is EPI’s 3rd party verifier.  We’ve jumped through the hoops so you don’t have to.

Where Can I Get More Information?

Call the Energy Payback Incentive staff at 800-654-7783 or 651-646-7959 or e-mail questions to StephanieB@bamn.org

Information for your accountant:
T the IRS Energy Efficient Home Credit form 8908
http://www.irs.gov/pub/irs-pdf/f8908.pdf

The US Department of Energy has detailed information about the new Home Energy Tax Credit. See the section “Tax Credits for Home Builders.”
http://www.energystar.gov/index.cfm?c=products.pr_tax_credits#6

The US Department of Energy has detailed information about the new Home Energy Tax Credit. See the section “Tax Credits for Consumers”  Then click on the “Home Improvements” link.

 http://www.energystar.gov/index.cfm?c=products.pr_tax_credits#s2