September 2013 • 31
ON BEHALF OF THE NATION’S 6,900
heating oil dealers and the nearly
million households they serv
to request modifications to ce
sions of the tax code that will enable our
members to be more competitive, increase
home energy efficiency and cut consumers’
heating bills.
ABOUT OUR INDUSTRY
Our associations collectively represent
America’s mostly small, family owned- and
operated-home heating oil providers and
their employees. In addition to providing
American consumers with safe and depend-
able heating oil, many of our members also
market Bioheat
®
, propane, kerosene and
motor fuels; service home heating, ventila-
tion and air conditioning (H-VAC) systems
and emergency generators; and offer com-
prehensive home energy auditing. Because
of the at-your-doorstep nature of the home
heating oil industry, we often have a close
relationship with our customers and local
communities, setting us apart from other
energy providers, such as large and in some
cases foreign-owned private utilities.
The home heating oil industry has a
long history of support for federal, state
and local initiatives that promote research,
development and deployment of ultra-effi-
cient home heating systems and consumer-
oriented tax incentives to encourage their
installation. Unfortunately, Congress has
offered home heating oil customers minimal
benefits with respect to such tax incentives,
including the current IRS Section 25C tax
credit for the installation of non-business
energy property.
C
O O
BUSINESS ENERGY PROPERTY
The Section 25C credit was enacted
as part of the Energy Policy Act of 2005
to incentivize taxpayers to reduce home
energy consumption through the installa-
tion of efficient space and water heating
appliances, air conditioners, doors, win-
dows, etc. For tax years 2006 and 2007,
the maximum claim for the installation of
any one of a number of qualifying home
energy retrofits was a mere $500. Further,
individual limits were established for cer-
tain types of residential energy properties
including a $150 cap on the installation
of a qualifying furnace or boiler. Congress
also set the bar unfavorably high for oil
furnaces and boilers, requiring an annual
fuel utilization efficiency (AFUE) rating of
95 or greater.
The American Recovery and Reinvest-
ment Act (ARRA) of 2009 made some
welcome improvements to the Section 25C
program. The ARRA offered homeowners
a tax credit of 30 percent of the cost of
qualifying home energy retrofits, up to a
maximum credit of $1,500. It also removed
individual appliance caps, including the
$150 cap on the installation of home
heating systems. This allowed customers
to claim up to $1,500 for one preferred
energy-saving retrofit, such as the instal-
lation of an efficient furnace or boiler.
Congress also lowered the AFUE rating
requirement for eligible oil furnaces and
boilers to 90 or greater.
amendments
.
the
Section 25C credit every year since
2011, it was largely returned to its pre-ARRA
credit amounts and qualifying language for
appliances and retrofits. The current tax
credit, which expires on December 31, 2013,
presents two major challenges for home-
owners looking to upgrade to a more efficient
existing heating oil furnace or boiler.
First, the current tax credit provides
minimal benefit to consumers. The amount
of the credit is too small to motivate hom-
eowners to make the necessary financial
investment in a more efficient home heating
system. Furthermore, current law places a
$150 cap on claims for the installation of
qualifying furnaces and boilers, providing a
mere 3-5 percent tax benefit on the average
cost of a heating oil system installation.
Such a small credit is unlikely to motivate a
homeowner to upgrade their existing home
heating system or to make any other capital
intensive home energy retrofit.
Second, the overly restrictive eligibility
requirements for oilheat appliances have
left the tax credit inaccessible to heating oil
consumers. Homeowners with oilheat must
upgrade to a furnace or boiler with a 95 or
greater AFUE rating to be eligible for the
credit. There are currently no (that is,
zero
)
boilers and only two furnaces that meet this
qualification. Even under the 2009-2010
ARRA credit, which temporarily lowered
the requirement to 90 AFUE, there were
only two furnaces and three boilers that
would have been eligible for the credit.
Continued …
HOME
seven
e, we write
rtain provi-
PROBLEMS
WITH THE SECTION
5C2 TAX REDIT F R N N-
T eh ARRA
expired at the end of 2010
While Congress renewed
New England Fuel Institute and 18 other Oilheat
associations recently wrote to the U.S. Senate Finance
Committee and the U.S. HouseWays andMeans Committee
to request changes in the Section 25C federal tax credit
for the installation of efficient home heating and cooling
appliances and other home energy retrofits. Those
committees had requested input on needed changes
to the federal tax code. Below is the text of
the coalition’s letter.
Oilheat Associations Recommend
Changes to 25C Tax Credits
