n-08-35.pdf

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Part III - Administrative, Procedural, and Miscellaneous

Amplification of Notice 2006-27

Certification of Energy Efficient Home Credit

Notice 2008-35

SECTION 1. PURPOSE
This notice clarifies and supersedes Notice 2006-27, 2006-11 I.R.B. 626, as
updated by Announcement 2006-88, 2006-46 I.R.B. 910. Notice 2006-27, as updated,
provided guidance regarding the calculation of heating and cooling energy consumption
for purposes of determining the eligibility of a dwelling unit (other than a manufactured
home) for the New Energy Efficient Home Credit under Internal Revenue Code § 45L.
Notice 2006-27 also provided guidance relating to the public list of software programs
that may be used to calculate energy consumption. Guidance relating to manufactured
homes is provided in Notice 2008-36.
This notice supersedes Notice 2006-27 by substantially republishing the
guidance contained in that publication. This notice clarifies the meaning of the terms
equivalent rating network and eligible contractor, and permits calculation procedures
other than those identified in Notice 2006-27 to be used to calculate energy
consumption. Finally, this notice clarifies the process for removing software from the list
of approved software and reflects the extension of the tax credit through December 31,
2008.

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SECTION 2. BACKGROUND
.01 In General. Section 45L provides a credit to an eligible contractor who
constructs a qualified energy efficient home. For qualified energy efficient homes (other
than manufactured homes), the amount of the credit is $2,000. A dwelling unit qualifies
for the credit if--
(1) It is located in the United States;
(2) Its construction is substantially completed after August 8, 2005;
(3) It meets the energy saving requirements of § 45L(c)(1); and
(4) It is acquired from the eligible contractor after December 31, 2005,
and before January 1, 2009, for use as a residence.
.02 Energy Saving Requirements
. To meet the energy saving requirements of §
45L(c)(1), a dwelling unit must be certified to provide a level of heating and cooling
energy consumption that is at least 50 percent below that of a reference dwelling unit
constructed in accordance with the standards of § 404 of the 2004 Supplement to the
2003 International Energy Conservation Code (2004 IECC Supplement), and to have
building envelope component improvements that provide for a level of heating and
cooling energy consumption that is at least 10 percent below that of a reference
dwelling unit.
.03 Calculation Procedures
. For purposes of section 2.02 of this notice, heating
and cooling energy consumption must be calculated in accordance with the procedures
prescribed in Residential Energy Services Network (RESNET) Publication No. 05-001
(Nov. 17, 2005) or No. 06-001 (June 1, 2006) or in accordance with an equivalent
calculation procedure.

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.04 Acquired from Eligible Contractor. A qualified energy efficient home is
acquired from an eligible contractor for use as a residence if the person that constructed
the home sells or leases the home to another person for use as a residence. A qualified
energy efficient home is not acquired from an eligible contractor if the person that
constructed the home retains the home for use as a residence. For example, a qualified
energy efficient home is acquired from an eligible contractor in the following situations:
(1) A person constructs a qualified energy efficient home and then sells
the home to the homeowner.
(2) A person constructs a qualified energy efficient home and then leases
the home to the lessee or tenant.
(3) A person hires a third party contractor to construct a qualified energy
efficient home and then sells the home to the homeowner. (See section 4.01(5) of this
notice for guidance regarding the person treated as the eligible contractor in this case.)
SECTION 3. CERTIFICATION
An eligible contractor must obtain the certification required under § 45L(c)(1) with
respect to a dwelling unit (other than a manufactured home) from an eligible certifier
before claiming the energy efficient home credit with respect to the dwelling unit. An
eligible contractor is not required to file the certification with the return on which the
credit is claimed. However, § 1.6001-1(a) of the Income Tax Regulations requires that
taxpayers maintain such books and records as are sufficient to establish the entitlement
to, and amount of, any credit claimed by the taxpayer. Accordingly, an eligible
contractor claiming a $2,000 credit under § 45L should retain the certification as part of
the eligible contractor’s records to satisfy this requirement. The certification will be

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treated as satisfying the requirements of § 45L(c)(1) if all construction has been
performed in a manner consistent with the design specifications provided to the eligible
certifier and the certification contains all of the following:
.01 The name, address, and telephone number of the eligible certifier.
.02 The address of the dwelling unit.
.03 A statement by the eligible certifier that--
(1) The dwelling unit has a projected level of annual heating and cooling
energy consumption that is at least 50 percent below the annual level of heating and
cooling energy consumption of a reference dwelling unit in the same climate zone;
(2) Building envelope component improvements alone account for a level
of annual heating and cooling energy consumption that is at least 10 percent below the
annual level of heating and cooling energy consumption of a reference dwelling unit in
the same climate zone; and
(3) Heating and cooling energy consumption have been calculated in the
manner prescribed in section 2.03 of this notice.
.04 A statement by the eligible certifier that field inspections of the dwelling unit
(or of other dwelling units under the sampling protocol described below) performed by
the eligible certifier during and after the completion of construction have confirmed that
all features of the home affecting such heating and cooling energy consumption comply
with the design specifications provided to the eligible certifier. With respect to builders
who build at least 85 homes during a twelve-month period or build subdivisions with the
same floor plan using the same subcontractors, the eligible certifier may use the
sampling protocol found in the current ENERGY STAR
®
for Homes Sampling Protocol

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Guidelines instead of inspecting all of the homes. The sampling protocols can be found
at the following web address:
http://www.energystar.gov/index.cfm?c=bldrs_lenders_raters.nh_sampling
.05 A list identifying--
(1) The dwelling unit’s energy efficient building envelope components and
their respective energy performance ratings as required by § 401.3 of the 2004 IECC
Supplement; and
(2) The energy efficient heating and cooling equipment installed in the
dwelling unit and the energy efficiency performance of such equipment as rated under
applicable Department of Energy Appliance Standards test procedures.
.06 Identification of the listed software program used to calculate energy
consumption (see section 5 of this notice).
.07 A declaration, applicable to the certification and any accompanying
documents, signed by a person currently authorized to bind the eligible certifier in these
matters, in the following form:
“Under penalties of perjury, I declare that I have examined this
certification, including accompanying documents, and to the best of my
knowledge and belief, the facts presented in support of this certification
are true, correct, and complete.”
SECTION 4. DEFINITIONS
.01 The following definitions apply for purposes of this notice:
(1) Building envelope components are basement walls, exterior walls,
floor, roof, and any other building element that encloses conditioned space, including

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any boundary between conditioned space and unconditioned space.
(2) A climate zone is a geographical area within which all locations have
similar long-term climate conditions as defined in Chapter 3 of the 2004 IECC
Supplement.
(3) A dwelling unit is a single unit providing complete independent living
facilities for one or more persons, including permanent provisions for living, sleeping,
eating, cooking, and sanitation, within a building that is not more than three stories
above grade in height.
(4) An eligible certifier is a person that is not related (within the meaning
of § 45(e)(4)) to the eligible contractor and has been accredited or otherwise authorized
by RESNET (or an equivalent rating network) to use energy performance measurement
methods approved by RESNET (or the equivalent rating network). An employee or
other representative of a utility or local building regulatory authority qualifies as an
eligible certifier if the employee or representative has been accredited or otherwise
authorized by RESNET (or an equivalent rating network) to use the approved energy
performance measurement methods.
(5) An eligible contractor is the person that constructed a qualified energy
efficient home. A person must own and have a basis in the qualified energy efficient
home during its construction to qualify as an eligible contractor with respect to the
home. For example, in the situation described in section 2.04(3) of this notice, if the
person that hires the third party contractor to construct the home owns and has the
basis in the home during its construction, the person that hires the third party contractor
is the eligible contractor and the third party contractor is not an eligible contractor.

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(6) An equivalent calculation procedure is a procedure that produces
results comparable to the results obtained under the procedures prescribed in
Residential Energy Services Network (RESNET) Publication No. 05-001
(Nov. 17, 2005) or No. 06-001 (June 1, 2006).
(7) An equivalent rating network includes, in a state that has established
energy efficiency standards under which a dwelling unit is required to achieve a
specified aggregate level of heating and cooling energy consumption for any purpose
(including compliance with building codes or eligibility for a state grant or tax credit), the
state agency administering those standards. Thus, if the agency has accredited or
otherwise authorized a person to use energy performance measurement methods
approved by the agency for use in determining whether the state’s energy
efficiency standards are satisfied, the person so accredited or authorized qualifies as an
eligible certifier.
(8) A manufactured home is a dwelling unit constructed in accordance
with the Federal Manufactured Home Construction and Safety Standards (24
C.F.R. 3280).
(9) A qualified energy efficient home is a dwelling unit that qualifies for the
credit under § 45L. See section 2.01 of this notice for the requirements that a dwelling
unit must satisfy to qualify for the credit.
(10) A reference dwelling unit is a dwelling unit that is similar in technical
specifications and design to the dwelling unit constructed by the eligible contractor
except that--
(a) The reference dwelling unit is constructed in accordance with

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the minimum standards of Chapter 4 of the 2004 IECC Supplement;
(b) The reference dwelling unit’s air conditioners have a Seasonal
Energy Efficiency Ratio (SEER) of 13, measured in accordance with 10 C.F.R.
430.23(m); and
(c) The reference dwelling unit’s heat pumps have a SEER of 13
and a Heating Seasonal Performance Factor (HSPF) of 7.7, measured in accordance
with 10 C.F.R. 430.23(m).
SECTION 5. SOFTWARE PROGRAMS
.01 In General
. The Internal Revenue Service will create and maintain a public
list of software programs that may be used to calculate energy consumption for
purposes of providing a certification under section 3 of this notice. This list of approved
software may be found at:
http://www.irs.gov/businesses/small/industries/article/0,,id=155445,00.html

.02 Requirements for Software Programs To Be Included on the Internal
Revenue Service List. A software program will be included on the list created by the
Internal Revenue Service if the software developer submits the following information to
the Service and RESNET:
(1) The name, address, and telephone number of the software developer,
(2) The name or other identifier of the program as it will appear on the list,
(3) The test results, test runs, and the software program with which the
test was conducted, and
(4) A declaration by the developer of the software program, made under
penalties of perjury, that the software program--

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(i) Has satisfied all tests required to conform to the software
accreditation process prescribed in Residential Energy Services Network (RESNET)
Publication No. 05-001 (Nov. 17, 2005) or No. 06-001 (June 1, 2006); or
(ii) Has satisfied all tests necessary to permit a determination that
the software program is sufficiently accurate to justify its use in calculating energy
consumption for purposes of providing a certification under section 3 of this notice.
.03 Addresses
. Submissions under this section must be addressed as follows:

Submissions to the Service submitted by U. S. mail:

Internal Revenue Service
Attn: Program Administrator
CC:PSI:6, Room 5114
P.O. Box 7604
Ben Franklin Station
Washington, DC 20044

Submissions to the Service submitted by a private delivery service:

Internal Revenue Service
Attn: Program Administrator
CC:PSI:6, Room 5114
1111 Constitution Ave., N.W.
Washington, DC 20224

Submissions to RESNET: Residential Energy Services Network
P.O. Box 4561
Oceanside, CA 92052-4561
.04 Original and Updated Lists
. A software program was included on the original
list if the software developer’s submission was received before March 1, 2006. The list
will be updated as necessary to reflect additions resulting from submissions received
after February 28, 2006, and deletions resulting from removal of software from the list
under section 5.05 of this notice.
.05 Removal from Published List
. The Service may, upon examination (and

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after appropriate consultation with the Department of Energy), determine that a software
program is not sufficiently accurate to justify its use in calculating energy consumption
for purposes of providing a certification under section 3 of this notice and remove the
software program from the published list. The Service may undertake an examination
on its own initiative or in response to a public request supported by appropriate analysis
of the software program’s deficiencies.
.06 Effect of Removal from Published List
. A software program may not be used
to calculate energy consumption for purposes of providing a certification that satisfies
the requirements of § 45L after the effective date of removal of the software from the
published list. The removal will not affect the validity of any certification provided with
respect to a dwelling unit on or before the effective date of removal from the published
list. Generally, notice that software is being removed from the published list will be
provided at the site specified in section 5.01 of this notice at least sixty (60) days before
the effective date of the removal.
.07 Public Availability of Information
. RESNET may make available for public
review any information provided to it under section 5.02 of this notice.
SECTION 6. PAPERWORK REDUCTION ACT
The collections of information contained in this notice have been reviewed and
approved by the Office of Management and Budget in accordance with the Paperwork
Reduction Act (44 U.S.C. 3507) under control number 1545-1995.
An agency may not conduct or sponsor, and a person is not required to respond
to, a collection of information unless the collection of information displays a valid OMB
control number.

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The collections of information in this notice are in sections 3 and 5. This
information is required to be collected and retained in order to ensure that a dwelling
unit (other than a manufactured home) meets the requirements for the energy efficient
home credit under § 45L. This information will be used to determine whether property
for which certifications are provided is property that qualifies for the credit. The
collection of information is required to obtain a benefit. The likely respondents are
corporations, partnerships, and individuals.
The estimated total annual reporting burden is 180 hours.
The estimated annual burden per respondent varies from 2.5 hours to 4 hours,
depending on individual circumstances, with an estimated average burden of 3 hours to
complete the certification required under this notice. The estimated number of
respondents is 45.
The estimated annual frequency of responses is on occasion.
Books or records relating to a collection of information must be retained as long
as their contents may become material in the administration of any Internal Revenue
law. Generally, tax returns and tax return information are confidential, as required by 26
U.S.C. 6103.
SECTION 7. EFFECT ON OTHER DOCUMENTS
Notice 2006-27, as updated by Announcement 2006-88, is clarified and
superseded. Announcement 2006-88 is also clarified and superseded.

SECTION 8. EFFECTIVE DATE

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This notice applies with respect to certifications provided after February 29, 2008.
Taxpayers may apply the provisions of this notice with respect to certifications provided
on or before February 29, 2008.
SECTION 9. DRAFTING INFORMATION
The principal author of this notice is Jennifer Bernardini of the Office of Associate
Chief Counsel (Passthroughs & Special Industries). For further information regarding
this notice contact Jennifer Bernardini at (202) 622-3110 (not a toll-free call).