Currently, taxpayers may be able to claim two tax credits for residential energy efficiency: one is scheduled to expire at the end of 2011, whereas the other is scheduled to expire at the end of 2016. The nbusiness energy property tax credit (Internal Revenue Code (IRC) 25C) currently provides homeowners with a tax credit for investments in certain high-efficiency heating, cooling, and water-heating appliances, as well as tax credits for energy-efficient windows and doors. For installations made during 2011, the credit rate was 10%, with a maximum credit amount of $500. The credit available during 2011 was less than what had been available during 2009 and 2010, when taxpayers were allowed a 30% tax credit of up to $1,500 for making energy-efficiency improvements to their homes. The residential energy efficient property credit (IRC 25D), which provides a 30% tax credit for investments in properties that generate renewable energy, such as solar panels, is scheduled to remain available through 2016. Advances in energy efficiency have allowed per-capita residential energy use to remain relatively constant since the 1970s, even as demand for energy-using techlogies has increased. Experts believe, however, that there is unrealized potential for further residential energy efficiency. One reason investment in these techlogies might t be at optimal levels is that certain market failures result in energy prices that are too low. If energy is relatively inexpensive, consumers will t have a strong incentive to purchase a techlogy that will lower their energy costs. Tax credits are one policy option to potentially encourage consumers to invest in energy-efficiency techlogies. Residential energy-efficiency tax credits were first introduced in the late 1970s, but were allowed to expire in 1985. Tax credits for residential energy efficiency were again enacted as part of the Energy Policy Act of 2005 (P.L. 109-58). These credits were expanded and extended as part of the American Recovery and Reinvestment Act of 2009 (ARRA; P.L. 111-5). The Section 25C credit was again extended, at a reduced rate, and with a reduced cap, through 2011, as part of the Tax Relief, Unemployment Insurance Reauthorization, and Job Creation Act of 2010 (P.L. 111-312). Although the purpose of residential energy-efficiency tax credits is to motivate additional energy efficiency investment, the amount of the investment resulting from these credits is unclear. Purchasers investing in energy-efficient property for other reasons-for example concern about the environment-would have invested in such property absent tax incentives, and hence stand to receive a windfall gain from the tax benefit. Further, the fact that the incentive is delivered as a nrefundable credit limits the provision's ability to motivate investment for low- and middle income taxpayers with limited tax liability. The administration of residential energy-efficiency tax credits has also had compliance issues, as identified in a recent Treasury Department Inspector General for Tax Administration (TIGTA) report. There are various policy options available for Congress to consider regarding incentives for residential energy efficiency. One option is to let the existing tax incentives expire as scheduled. A second option would be to extend or modify the current tax incentives. S. 3521, the Family and Business Tax Cut Certainty Act of 2012, would extend the 25C credit for two years-2012 and 2013. Ather option would be to replace the current tax credits with a grant or rebate program-the Home Star Energy Retrofit Act of 2010 (H.R. 5019 / S. 3177 in the 111th Congress), for example. Grants or rebates could be made more widely available, and t be limited to taxpayers with tax liability. Enacting a grant or rebate program, however, would have additional budgetary cost.