Energy Burden Tax Credit Act
- Sponsor
- Rep. Pappas, Chris [D-NH-1]
- Committees
- Ways and Means Committee (primary)
- Last action
- Jan 13, 2026
Bottom line
This bill creates a temporary, income-limited tax credit to provide financial relief to households facing high energy costs for home heating and cooling.
What it actually does
This bill establishes a new, temporary, and refundable tax credit for individuals to help offset the costs of heating and cooling their principal residence. The credit is equal to 75% of qualified energy expenses that exceed 3% of the taxpayer's modified adjusted gross income, with a maximum credit of $1,500 ($3,000 for joint filers) and income limitations for eligibility. It applies to taxable years beginning after December 31, 2024, and terminates after December 31, 2027.
Proponents argue
Supporters argue that this bill provides targeted financial relief to low- and middle-income households disproportionately affected by high energy costs, making essential home heating and cooling more affordable and directly addressing energy poverty by offsetting a significant portion of their utility bills.
Opponents contend
Critics might contend that while providing relief, the credit is an untargeted subsidy that could inflate energy demand, potentially driving up prices further, and that it adds to the national deficit without addressing underlying energy cost issues or promoting long-term energy efficiency.
The bill is very short and clearly written, allowing for quick comprehension of its provisions and implications.
Section 2(a), inserting new Section 36C into the Internal Revenue Code
Establishment of Energy Burden Credit
This provision creates a new tax credit, Section 36C, allowing individuals to claim a credit against their income tax. The credit amount is equal to 75% of their "qualified energy expenses" for the taxable year. This credit is designed to help offset the cost of fuel or electricity used to heat or cool a taxpayer's primary residence.
Supporters argue
Supporters argue this credit directly addresses the financial strain of high energy costs, providing tangible relief to households struggling to afford essential utilities.
Critics contend
Opponents might contend that a credit based on expenses rather than efficiency improvements does not incentivize long-term solutions to energy burdens.
Tradeoffs
This provision balances immediate financial relief for consumers against potential disincentives for energy conservation or investment in energy-efficient home improvements.
Section 2(a), new Section 36C(b) of the IRC
Definition of Qualified Energy Expenses
This section defines "qualified energy expenses" as amounts paid for fuel or electricity to heat or cool the taxpayer's principal residence. Crucially, only expenses exceeding 3% of the taxpayer's modified adjusted gross income (MAGI) are considered "qualified." This threshold ensures the credit targets those for whom energy costs represent a significant portion of their income.
Section 2(a), new Section 36C(c) of the IRC
Credit Dollar and Income Limitations
This provision sets two key limits on the credit. First, there's a dollar cap: the credit cannot exceed $1,500 for individuals or $3,000 for those filing jointly. Second, there's an income limitation: no credit is allowed if a taxpayer's modified adjusted gross income (MAGI) exceeds $75,000 ($150,000 for joint filers). These limits ensure the credit is primarily directed towards lower and middle-income households.
Section 2(a), new Section 36C(e) of the IRC
Temporary Nature of the Credit
This section specifies that the energy burden credit will not be allowed for any taxable year beginning after December 31, 2027. This makes the credit a temporary measure, set to expire after three years (applying to tax years 2025, 2026, and 2027, given the effective date).
The amendments made by this section, establishing the energy burden credit, shall apply to taxable years beginning after December 31, 2024. This means the credit would be available for the 2025 tax year.
Section 2(c)
Why it matters:Standard legislative practice for specifying implementation timelines.
Case for: Supporters would note this allows for rapid implementation of the credit to address current energy cost concerns.
Case against: No specific opposition is typically raised against the effective date itself, but critics of the credit might see it as too soon.
Estimated impact: Determines when the fiscal impact of the credit begins.
Defines "modified adjusted gross income" (MAGI) for the purpose of the credit's income limitation and the 3% expense threshold. It specifies that MAGI is calculated without regard to sections 911 (foreign earned income), 931 (income from U.S. possessions), and 933 (income from Puerto Rico).
Section 2(a), new Section 36C(d) of the IRC
Why it matters:Standard legislative practice for defining terms used within a new section of the tax code.
Case for: Ensures that certain types of income, particularly foreign earned income, do not artificially inflate a taxpayer's income for the purpose of this credit, thus keeping the focus on domestic energy burdens.
Case against: No specific opposition, as it aligns with common tax credit definitions.
Estimated impact: Ensures the credit's income limitations are applied consistently and fairly to taxpayers with specific income sources.