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Sec. 136. Energy Conservation Subsidies Provided By Public Utilities

I.R.C. § 136(a) Exclusion
Gross income shall not include the value of any subsidy provided (directly or indirectly) by a public utility to a customer for the purchase or installation of any energy conservation measure.
I.R.C. § 136(b) Denial Of Double Benefit
Notwithstanding any other provision of this subtitle, no deduction or credit shall be allowed for, or by reason of, any expenditure to the extent of the amount excluded under subsection (a) for any subsidy which was provided with respect to such expenditure. The adjusted basis of any property shall be reduced by the amount excluded under subsection (a) which was provided with respect to such property.
I.R.C. § 136(c) Energy Conservation Measure
I.R.C. § 136(c)(1) In General
For purposes of this section, the term “energy conservation measure” means any installation or modification primarily designed to reduce consumption of electricity or natural gas or to improve the management of energy demand with respect to a dwelling unit.
I.R.C. § 136(c)(2) Other Definitions
For purposes of this subsection—
I.R.C. § 136(c)(2)(A) Dwelling Unit
The term “dwelling unit” has the meaning given such term by section 280A(f)(1).
I.R.C. § 136(c)(2)(B) Public Utility
The term “public utility” means a person engaged in the sale of electricity or natural gas to residential, commercial, or industrial customers for use by such customers. For purposes of the preceding sentence, the term “person” includes the Federal Government, a State or local government or any political subdivision thereof, or any instrumentality of any of the foregoing.
I.R.C. § 136(d) Exception
This section shall not apply to any payment to or from a qualified cogeneration facility or qualifying small power production facility pursuant to section 210 of the Public Utility Regulatory Policy Act of 1978.
(Added by Pub. L. 102-486; Sec. 1912(a), Oct. 24, 1992; amended Pub. L. 104-188, title I, Sec. 1617(a), (b)(2), Aug. 20, 1996, 110 Stat. 1755.)
BACKGROUND NOTES
AMENDMENTS
1996 — Subsec. (a). Pub. L. 104-188, 1617(b)(1) amended subsec. (a) generally, which prior to amendment read as follows:
‘(a) EXCLUSION.
‘(1) IN GENERAL.
‘Gross income shall not include the value of any subsidy provided (directly or indirectly) by a public utility to a customer for the purchase or installation of any energy conservation measure.
‘(2) LIMITATION ON EXCLUSION FOR NONRESIDENTIAL PROPERTY.
‘(A) IN GENERAL.
‘In the case of any subsidy provided with respect to any energy conservation measure referred to in subsection (c)(1)(B), only the applicable percentage of such subsidy shall be excluded from gross income under paragraph (1).
‘(B) APPLICABLE PERCENTAGE.
‘For purposes of subparagraph (A), the term “applicable percentage” means
‘(i) 40 percent in the case of subsidies provided during 1995,
‘(ii) 50 percent in the case of subsidies provided during 1996, and
‘(iii) 65 percent in the case of subsidies provided after 1996. ‘
1996 — Subsec. (c)(1). Pub. L. 104-188, 1617(a) amended par. 1 by striking “energy demand—” and the text that followed and inserting new text at the end of the sentence. The paragraph prior to amendment read as follows:
(1) IN GENERAL.
For purposes of this section, the term “energy conservation measure” means any installation or modification primarily designed to reduce consumption of electricity or natural gas or to improve the management of energy demand —
(A) with respect to a dwelling unit, and
(B) on or after January 1, 1995, with respect to property other than dwelling units.
The purchase and installation of specially defined energy property shall be treated as an energy conservation measure described in subparagraph (B).
1996 — Subsec. (c)(2). Pub. L. 104-188, 1617(b)(2) struck “AND SPECIAL RULES” from the paragraph heading, struck subpar. (A) and redesignated subpar. (B) and (C) as subpar. (A) and (B) respectively. The stricken text of former subpar. (A) read as follows:
(A) SPECIALLY DEFINED ENERGY PROPERTY.
The term “specially defined energy property” means —
(i) a recuperator,
(ii) a heat wheel,
(iii) a regenerator,
(iv) a heat exchanger,
(v) a waste heat boiler,
(vi) a heat pipe,
(vii) an automatic energy control system,
(viii) a turbulator,
(ix) a preheater,
(x) a combustible gas recovery system,
(xi) an economizer,
(xii) modifications to alumina electrolytic cells,
(xiii) modifications to chlor-alkali electrolytic cells, or
(xiv) any other property of a kind specified by the Secretary by regulations, the principal purpose of which is reducing the amount of energy consumed in any existing industrial or commercial process and which is installed in connection with an existing industrial or commercial facility.
EFFECTIVE DATE OF 1996 AMENDMENTS
Section 1617(c) of Pub. L. 104-188 provides that: amendments made by this section shall apply to amounts received after December 31, 1996, unless received pursuant to a written binding contract in effect on September 13, 1995, and at all times thereafter.”
PRIOR SECTION
A prior Section 136 was redesignated by Pub. L. 102-486 as Section 137.