Wednesday, February 2, 2011

Background on 2011 Biomass Stove tax Credit

From Public Law No: 111-312
The Tax Relief, Unemployment Insurance Reauthorization, and Job Creation Act of 2010 (TRUIRJCA)

SUMMARY OF 2011 BIOMASS STOVE TAX CREDIT LANGUAGE
President Obama signed into law on December 17, 2010, the Tax Relief, Unemployment Insurance Reauthorization, and Job Creation Act of 2010 (TRUIRJCA).

TRUIRJCA, which focused mainly on extending Bush-era tax rates, reinstates for 2011 the tax credit for energy-efficient improvements (such as biomass stoves) to existing homes to the lower levels that existed prior to passage in early 2009 of the American Recovery and Reinvestment Act (ARRA).

The new tax credit in TRUIRJCA provides:
  • 10% credit for the purchase of a 75% efficient biomass heating appliance in 2011, to a maximum of $300
  • Removal of LHV (lower heating value level) efficiency measurement
  • Credit applies to purchase price only and is not extended to installation
  • A life-time limit for all tax credits in this section

RECENT HISTORY OF THE BIOMASS TAX CREDIT
2010 (2011) The latest tax measure, TRUIRJCA, passed at the end of 2010, took the numbers of the biomass-burning stove tax credit back to its pre-2009 levels:
  • Tax credit of 10% of purchase price (not to include installation), up to a maximum credit of $300
  • Applicable for purchases in 2011 only
  • Kept the 75% efficiency level because it referenced the prior credit and did not explicitly (or implicitly) remove the 75% number 
  • Explicitly removed the Low Heating Value (LHV) testing methodology from TRUIRJCA at Sec. 710(b)(2)(B) but did not mention any substitute method.

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 had been working closely with Senator Susan Collins (R-ME) to ensure that biomass tax credit language was contained in the bill, and we are appreciative of the efforts she put forth in achieving its inclusion. Of particular note is Sen. Collins’ inclusion of 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.  

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