Wednesday, December 22, 2010

Tax Credit Extended for Biomass Heating Appliances

On Friday, December 17, President Obama signed into law the $858 billion tax package that keeps current tax rates in place and extends a series of tax credits geared toward boosting the sluggish economy. Included in this package was the extension of a tax credit for biomass heating appliances that was set to expire on December 31st.

The extension of the tax credit – which was never certain – is good news for the hearth industry. However, Congress did decrease the benefit to consumers that was in place from 2009-2010 under the American Recovery and Reinvestment Act and added further restrictions.

The new tax credit as outlined provides:

  • 10% credit for the purchase of biomass heating appliance in 2011, capped at $300
  • Removal of the lower heating value level (LHV) efficiency measurement
  • Credit applies to purchase price only and is not extended to installation
In the weeks leading up to Congress’ vote on the tax package, HPBA reached out to congressional leaders to remind them of the importance of this tax credit not only to the hearth industry but to consumers interested in purchasing biomass heating systems. HPBA has been working closely with Senator Susan Collins (R-ME) to ensure that a tax credit was contained in the bill, and we are appreciative of the efforts she put forth in achieving its inclusion. Of particular note, Sen. Collins has included language in the Congressional Record (the official transcript of the United States Congress) that directs the IRS to continue to use the lower heating value as the operative efficiency methodology in determining which appliance qualifies for the tax credit. A portion of her remarks stated:

“The IRS has issued guidance directing that the ‘lower heating value’ methodology should be used, which is consistent with industry practices and with our intent to ensure that the credit is available for efficient and clean-burning wood and wood-pellet stoves. Removing the reference to the ‘lower heating value’ from the Code serves little purpose. Certainly, however, it does not mean that this common-sense methodology is precluded, nor does it require the IRS to revisit its methodology. I hope that my comments today will help avoid confusion about the use of the ‘lower heating value’ methodology with respect to this tax credit.” (Congressional Record, December 15, 2010; Statement by Senator Susan M. Collins; H.R. 4853, Middle Class Tax Relief Act of 2010)

By extending this tax credit, Congress signals its support of the renewable fuel industry. We will continue to work with Congress to achieve recognition for the hearth industry and benefits for Americans who seek to heat with biomass fuel.

Finally, we would like to thank you for responding to our call to contact to your Representatives and Senators in Congress emphasizing the importance and need of a tax credit for the hearth industry.