Has the Ship Truly Sailed on 25C?
Did you hear the news? Could it possibly be true? The government is reinstating the beloved 25C tax credit? Well, maybe. But don't hold your breath.
On Aug. 2, the Senate Finance Committee, by a vote of 19-5, favorably reported out a number of amendments to the Family and Business Tax Cut Certainty Act of 2012.
I know, you're thinking, what does that mean to me and why do I care.
Well, the Family and Business Tax Cut Certainty Act is essentially acting as a cargo shipful of tax extensions for a number of incentives that have expired, or are set to expire. (Someone cue up the theme song to Love Boat...)
Many in the HVAC industry may be surprised to learn that the (somewhat) cherished 25C and 45L tax incentives were included in this bill and, if approved, would be extended for two additional years.
In case you've forgotten, 25C, or the "Existing Home Retrofit Tax Credit" was first implemented in 2005 and allowed eligible taxpayers to claim 10 percent, up to $500, on costs associated with improved residential energy efficiency. The credit expired in 2008, but was revived in 2009, with an increased maximum amount of $1,500, or 30 percent of qualified costs. The credit was then eliminated at the close of 2011.
The tax credit was utilized as IRS tax data from 2009 shows that homeowners claimed $5.9 billion in 25C and 25D tax credits. The credit was not one that catered to the wealthy, with 93 percent of claims processed by taxpayers with adjusted gross incomes of $200,000 or less.
A total of 34 businesses and associations, including Heating Air-conditioning & Refrigeration Distributors International (HARDI), sent a letter in December 2011 to the Committee on Ways and Means in support of the tax credit. In the letter, HARDI and others stated that "in 2009 and 2010 the 25C tax credit was critical to maintaining our economic vitality."
While 25C is geared toward assisting homeowners, it is also beneficial to contractors (and thus distributors) who may consider packaging the credit with rebates and utility programs to help "upsell" products. When offering products, a potential customer may be more interested in an upgraded product if they can snag it at a cheaper price. Discounted products always move faster than those selling at full-price. A dollar saved is a dollar earned.
The Certification of Energy Efficient Home Credit, or 45L, provided homebuilders a $2,000 credit if they built a dwelling that met or exceeded a list of energy saving requirements. The credit, which first appeared in 2006, also applied to manufactured homes, with rates between $1,000 and $2,000 depending on the level of achieved energy savings. The 45L credit was set to expire in 2007, but was extended in 2008. In 2011, more than 32,000 homes met the criteria and benefited from the incentive, which also was drowned by Congress at the close of 2011.
The more high-end products being moved, the more pennies in the piggy bank. And, with pending regional standards legislation looming, distributors can use every advantage they can get.
Again, with the speed of our current Congress - which rivals the speed of a sprinting sloth - I wouldn't get my hopes up. However, it may be a very positive sign that these incentives are at least back on the drawing board.
The Senate is expected to further discuss the Family and Business Tax Cut Certainty Act, and its financial freight, following the August recess (which reconvened Sept. 10), while the House isn't expected to consider the measure until late November - if at all. If you support the return of 25C or 45L, now may be a good time to come to the rescue by spamming your local representative. If not, they may forever be stranded on Gilligan's Island.