Energy Conservation and Climate Change: Factors to Consider in the Design of the Nonbusiness Energy Property Credit Page: 4 of 39
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eligible for the credit, or introducing a base amount for the 2009 credit
may have affected measures such as the amount of credit claimed, the
revenue cost to the federal government, and incentives for taxpayers to
increase their spending on energy efficiency improvements.
Scope and For our first objective-to evaluate factors to consider in deciding whether
the credit should be cost-based or performance-based-we reviewed
Methodology relevant literature and consulted with experts on criteria for a well-
designed credit. On the basis of this review, we determined that tax credit
design, which includes such factors as whether the credit is cost-based or
performance-based, should be evaluated according to:
* how well the logic of the design is related to the credit's purpose,
* how likely the design is to achieve that purpose,
* how costly it would be to achieve this purpose using this design, and
* how fairly the credit's costs and benefits are distributed under this
Using these criteria, we analyzed the current credit and changes that
have been proposed to it.
For our second objective-estimating how introducing a base spending
amount for the 2009 credit may have affected measures such as the
amount of credit claimed, the revenue cost to the federal government,
and incentives for taxpayers to increase their spending on energy
efficiency improvements-we used the Internal Revenue Service's (IRS)
2009 Statistics of Income (SOI) database, the most current data
available, to simulate the effects that different bases would have had on
credit claimed, revenue costs, and incentives faced by taxpayers, using
actual spending and purchase patterns from the 2009 credit claims.
These simulations do not include behavioral responses such as changes
in the number of claimants and amounts of spending due to the credit. To
conduct these simulations, we examined two alternative bases: a base
calculated as a percentage of adjusted gross income (AGI) and a base
derived from average spending on different types of improvements. For
this objective, we reviewed documentation for the databases we used,
conducted electronic checks, and determined that the data presented
were sufficiently reliable for our purposes.
Throughout this report, the percentage estimates have a margin of error
of plus or minus 5 percentage points, and the estimates of total amounts
have a margin of error of plus or minus 5 percent of the estimate.
GAO-12-318 Nonbusiness Energy Property Tax Credit
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United States. Government Accountability Office. Energy Conservation and Climate Change: Factors to Consider in the Design of the Nonbusiness Energy Property Credit, report, April 2, 2012; Washington D.C.. (digital.library.unt.edu/ark:/67531/metadc301191/m1/4/: accessed January 21, 2019), University of North Texas Libraries, Digital Library, digital.library.unt.edu; crediting UNT Libraries Government Documents Department.