HR7044-119

What This Bill Does

The Energy Burden Tax Credit Act creates a new refundable tax credit for households whose heating and cooling expenses consume a high share of income. The new section 36C credit equals 75 percent of qualified energy expenses above 3 percent of modified adjusted gross income. Qualified expenses are amounts paid for fuel or electricity to heat or cool a taxpayer's principal residence, excluding amounts reimbursed or subsidized by a government program. The credit is capped at $1,500 for an individual return and $3,000 for a joint return. Taxpayers with modified adjusted gross income above $75,000, or $150,000 for a joint return, cannot claim it. The bill treats the credit like other refundable credits for deficiency and payment purposes, adds a table entry for section 36C, applies to taxable years beginning after December 31, 2024, and terminates the credit for taxable years beginning after December 31, 2027.

Who Benefits and How

Low-income taxpayers, moderate-income taxpayers, seniors on fixed incomes, families in extreme-heat or extreme-cold regions, and renters or homeowners with high utility bills benefit because the credit covers a share of heating and cooling costs above an income-based threshold. Joint filers benefit from a higher $3,000 cap. Tax preparers and community tax assistance programs gain a concrete formula for identifying households whose energy costs exceed 3 percent of income.

Who Bears the Burden and How

Federal revenue collections and taxpayers broadly bear the cost because the refundable credit reduces receipts and can create outlays when the credit exceeds tax liability. The Internal Revenue Service must update forms, instructions, processing systems, refundable-credit controls, and audit guidance. Claimants must document principal residence status, heating and cooling expenses, income, government reimbursements, and eligibility below the hard income limit. Utility-bill assistance programs may need to coordinate messaging so subsidized amounts are not double-counted.

Key Provisions

• Creates new Internal Revenue Code section 36C for an energy burden credit.
• Provides a refundable credit equal to 75 percent of qualified heating and cooling expenses above 3 percent of income.
• Limits the credit to $1,500 for individual returns and $3,000 for joint returns.
• Bars taxpayers above $75,000 of modified adjusted gross income, or $150,000 for joint filers, from claiming the credit.
• Excludes energy expenses reimbursed or subsidized by government programs.
• Terminates the credit after taxable years beginning after December 31, 2027.