H.R. 2463: Mechanical Insulation Installation Incentive Act of 2025

This bill, known as the Mechanical Insulation Installation Incentive Act of 2025, aims to amend the Internal Revenue Code to provide tax incentives for the labor costs associated with the installation of mechanical insulation. Here are the key elements of the bill:

Credit for Labor Costs

The bill proposes a tax credit equal to 10% of the labor costs incurred for installing mechanical insulation property during the taxable year. This credit is designed to encourage installations that meet specific energy efficiency standards.

Definition of Mechanical Insulation Labor Costs

For this bill, "mechanical insulation labor costs" are defined as the expenses related to the labor of installing insulation on mechanical systems that were initially put into service at least one year prior to the installation of new insulation. The insulation in question must meet or exceed certain performance standards related to energy efficiency and must be made from materials that qualify under the definition set forth in the bill.

Mechanical Insulation Property

The term "mechanical insulation property" includes insulation materials and any associated products that are installed as part of a mechanical system. Such systems must:

• Be located in the United States
• Be eligible for depreciation
• Comply with minimum efficiency standards as defined in Reference Standard 90.1
• Result in a reduction of energy loss from the mechanical system

Termination of Credit

The provision for the mechanical insulation labor costs credit will be applicable only to labor costs incurred before December 31, 2028. This means that companies and individuals looking to take advantage of this tax incentive must complete their installations before that date.

Integration with General Business Credit

The new labor costs credit will be added to the existing business credit framework outlined in the Internal Revenue Code, ensuring that businesses can claim this new credit alongside other available credits.

Amendments to Related Tax Provisions

Several adjustments are made to existing tax provisions to ensure clarity and compliance with this new credit. Specifically:

• No tax deductions will be available for the portion of mechanical insulation labor costs that correspond to the amount of the credit claimed.
• If the credit exceeds the allowable tax deduction, the excess amount will have to be adjusted against capital expenses.

Effective Date

The changes enacted by this bill will apply to amounts paid or incurred starting after December 31, 2025, for taxable years ending after that date.

Relevant Companies

• None found