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Title 26 — Internal Revenue CodeRelease 119-73not60

§136 Energy Conservation Subsidies Provided by Public Utilities

Title 26 › Subtitle Subtitle A— Income Taxes › Chapter 1— NORMAL TAXES AND SURTAXES › Subchapter B— Computation of Taxable Income › Part III— ITEMS SPECIFICALLY EXCLUDED FROM GROSS INCOME › § 136

Last updated Apr 5, 2026|Official source

Summary

Money or help a public utility gives a customer to buy or install energy-saving equipment for a dwelling unit does not count as taxable income. Because that amount is not taxed, you cannot also claim a tax deduction or credit for the same money, and you must lower the property's tax basis by the excluded amount. An energy conservation measure is any change mainly meant to cut electricity or natural gas use or manage energy demand for a dwelling unit (see section 280A(f)(1)). A public utility is anyone who sells electricity or natural gas to residential, commercial, or industrial customers; "person" can include federal, state, or local governments or their agencies. These rules do not apply to payments to or from qualified cogeneration or qualifying small power production facilities under section 210 of the Public Utility Regulatory Policy Act of 1978.

Full Legal Text

Title 26, §136

Internal Revenue Code — Source: USLM XML via OLRC

(a)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.
(b)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.
(c)(1)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.
(2)For purposes of this subsection—
(A)The term “dwelling unit” has the meaning given such term by section 280A(f)(1).
(B)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.
(d)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.

Legislative History

Notes & Related Subsidiaries

Editorial Notes

References in Text

section 210 of the Public Utility Regulatory Policy Act of 1978, referred to in subsec. (d), probably means section 210 of the Public Utility Regulatory Policies Act of 1978, Pub. L. 95–617, which is classified to section 824a–3 of Title 16, Conservation.

Prior Provisions

A prior section 136 was renumbered section 140 of this title.

Amendments

1996—Subsec. (a). Pub. L. 104–188, § 1617(b)(1), reenacted heading without change and amended text generally, substituting present provisions for former provisions which consisted of general exclusion in par. (1) and limitation for exclusion on nonresidential property in par. (2). Subsec. (c)(1). Pub. L. 104–188, § 1617(a), substituted “energy demand with respect to a dwelling unit.” for “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).” Subsec. (c)(2). Pub. L. 104–188, § 1617(b)(2), struck out “and special rules” after “definitions” in heading, redesignated subpars. (B) and (C) as (A) and (B), respectively, and struck out former subpar. (A) which related to “specially defined energy property”.

Statutory Notes and Related Subsidiaries

Effective Date

of 1996 Amendment Pub. L. 104–188, title I, § 1617(c), Aug. 20, 1996, 110 Stat. 1858, provided that: “The

Amendments

made by this section [amending 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.”

Effective Date

Pub. L. 102–486, title XIX, § 1912(c), Oct. 24, 1992, 106 Stat. 3016, provided that: “The

Amendments

made by this section [enacting this section and renumbering former section 136 as 137] shall apply to amounts received after December 31, 1992.”

Reference

Citations & Metadata

Citation

26 U.S.C. § 136

Title 26 — Internal Revenue Code

Last Updated

Apr 5, 2026

Release point: 119-73not60