Qualified Energy Conservation Bonds (QECBs) (Federal)

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Last modified on February 12, 2015.

Financial Incentive Program

Place United States

Name Qualified Energy Conservation Bonds (QECBs)
Incentive Type Federal Loan Program
Applicable Sector Local Government, State Government, Tribal Government
Eligible Technologies Solar Thermal Electric, Photovoltaics, Landfill Gas, Wind, Biomass, Hydroelectric, Geothermal Electric, Municipal Solid Waste, Anaerobic Digestion, Tidal Energy, Wave Energy, Ocean Thermal, Yes; specific technologies not identified
Active Incentive Yes

Implementing Sector Federal
Energy Category Renewable Energy Incentive Programs, Energy Efficiency Incentive Programs
Amount Varies

Program Administrator U.S. Internal Revenue Service

Date added to DSIRE 2008-10-23
Last DSIRE Review 2012-07-09

References DSIREDatabase of State Incentives for Renewables and Efficiency[1]


The Energy Improvement and Extension Act of 2008, enacted in October 2008, authorized the issuance of Qualified Energy Conservation Bonds (QECBs) that may be used by state, local and tribal governments to finance certain types of energy projects. QECBs are qualified tax credit bonds, and in this respect are similar to new Clean Renewable Energy Bonds or CREBs. The October 2008 enabling legislation set a limit of $800 million on the volume of energy conservation tax credit bonds that may be issued by state and local governments. The American Recovery and Reinvestment Act of 2009, enacted in February 2009, expanded the allowable bond volume to $3.2 billion. In April 2009, the IRS issued Notice 2009-29 providing interim guidance on how the program will operate and how the bond volume will be allocated. Subsequently, H.R. 2847 enacted in March 2010 introduced an option allowing issuers of QECBs and New CREBs to recoup part of the interest they pay on a qualified bond through a direct subsidy from the Department of Treasury. Guidance from the IRS on this option was issued in April 2010 under Notice 2010-35.

With tax credit bonds, generally the borrower who issues the bond pays back only the principal of the bond, and the bondholder receives federal tax credits in lieu of the traditional bond interest. The tax credit may be taken quarterly to offset the tax liability of the bondholder. The tax credit rate is set daily by the U.S. Treasury Department; however, energy conservation bondholders will receive only 70% of the full rate set by the Treasury Department under 26 USC § 54A. QECB rates are available here. Credits exceeding a bondholder's tax liability may be carried forward to the succeeding tax year, but cannot be refunded. Energy conservation bonds differ from traditional tax-exempt bonds in that the tax credits issued through the program are treated as taxable income for the bondholder.

For QECBs issued after March 18, 2010, the bond issuer may make an irrevocable election to receive a direct payment from the Department of Treasury equivalent to the amount of the non-refundable tax credit described above, which would otherwise accrue to the bondholder. The direct payment comes in the form of a refundable tax credit to the issuer in lieu of a tax credit to the bondholder. This option was formerly limited to Build America Bonds (see 26 USC § 6431, H.R. 2847 and IRS Notice 2010-35 for details). The advantage of either option is that it creates a lower effective interest rate for the issuer because the federal government subsidizes a portion of the interest costs.

In contrast to CREBs, QECBs are not subject to a U.S. Department of Treasury application and approval process. Bond volume is instead allocated to each state based on the state's percentage of the U.S. population as of July 1, 2008. Each state is then required to allocate a portion of its allocation to "large local governments" within the state based on the local government's percentage of the state's population. Large local governments are defined as municipalities and counties with populations of 100,000 or more. Large local governments may reallocate their designated portion back to the state if they choose to do so. IRS Notice 2009-29 contains a list of the QECB allocations for each state and U.S. territory. Implementing allocations and reallocations most often, but not always, takes place through State Energy Offices. As of this writing some states have yet to assign implementation responsibilities to a specific state agency.

The definition of "qualified energy conservation projects" is fairly broad and contains elements relating to energy efficiency capital expenditures in public buildings that reduce energy consumption by at least 20%; green community programs (including loans and grants to implement such programs); renewable energy production; various research and development applications; mass commuting facilities that reduce energy consumption; several types of energy related demonstration projects; and public energy efficiency education campaigns. In July 2012 the IRS issued Notice 2012-44 clarifying the meaning of "capital expenditures" and "green community program", and providing guidance on meeting the 20% energy consumption reduction requirement for energy -efficiency related capital expenditures in publicly-owned buildings (see 26 USC § 54D and IRS Notice 2012-44 for additional details). Renewable energy facilities that are eligible for CREBs are also eligible for QECBs.

For more information on QECBs, contact Timothy Jones, David White, or Zoran Stojanovich of the IRS Office of Associate Chief Counsel at (202) 622-3980.

Incentive Contact

Contact Name Public Information - IRS
Department U.S. Internal Revenue Service

Address 1111 Constitution Avenue, N.W.

Place Washington, District of Columbia
Zip/Postal Code 20224
Phone (800) 829-1040

Website http://www.irs.gov

Authorities (Please contact the if there are any file problems.)

Authority 1: 26 USC § 54A
Date Effective 2008-10-03
Date Enacted 10/03/2008 (subsequently amended)

Authority 2: 26 USC § 54D
Date Effective 2008-10-03
Date Enacted 10/03/2008 (subsequently amended)

Authority 3: IRS Notice 2009-29
Date Effective 2009-04-07

Authority 4: 26 USC § 6431
Date Effective 03/18/2010 (for QECBs)
Date Enacted 02/17/2009 (subsequently amended)

Authority 5: IRS Notice 2010-35
Date Effective 2010-04-26

Authority 6: IRS Notice 2012-44
Date Effective 2012-07-09

  • Incentive and policy data are reviewed and approved by the N.C. Solar Center's DSIRE project staff.[1]


  1. 1.0 1.1  "Database of State Incentives for Renewables and Efficiency"