Gearing Up for the 30/30 Rule
In an effort to boost the sagging economy and further political agenda items, President Obama and Congress recently enacted the American Recovery and Reinvestment Act of 2009. One notable element of that legislation is the energy efficient home improvement tax credit.
Under the Internal Revenue Service code, purchase of exterior windows and/or exterior doors that improve energy efficiency of a home can, under certain circumstances, entitle the owner to a tax credit. Previously, the credit was limited $200 for windows, but the stimulus act ups the “ante” to $1500. It also puts clear definitions on what window and door products qualify for the tax credit—specifically, the units must be have a U-value of 0.30 or less and a SHGC of 0.30 or less–the 30/30 rule.
Say what you will about the justification for the standard itself–increased energy efficiency, push the market to a high performance line, etc.–distributors and manufacturers must be careful when faced with consumer questions about the availability of tax credits. Window and door companies are not in the business of giving tax advice, nor should they be. So what happens when a homeowner asks, “Will I get a tax credit?”
From a legal perspective, companies should be sure whatever sales representations they make—rating, performance, warranty—can be supported by testing and hard data. This advice holds truer when dealing with performance measures established by the federal government. Whether a product can meet the 30/30 rule, under what circumstances, and in what configurations, demands a solid analysis from manufacturers and distributors. And, because performance is unit based, the units must meet the 30/30 rule as sold. Merely because one model—with Low-E, argon and no grids—meets the standards does not certify the entire product line as qualifying.
Detailing of size, grid, glass, coatings, frame materials and many other qualifications must be considered and tested to avoid misrepresenting performance characteristics of a particular product. Moreover, you need to be cautious with respect to the argument that the stimulus act creates a five year 30/30 warranty. None of this is to suggest that manufacturers or distributors would intentionally misrepresent the performance characteristics of their products in the interests of getting sales. Because of the variables, it is clear, however, that mistakes could happen without good organization and training. The prescriptive performance requirements in the stimulus, coupled with the need for stimulus in our markets, create a recipe for misconstruing mistakes as misrepresentations driven by the pocketbook-impact.
Make sure you do not “oversell” and push product capability without documentation. In these times, it is folly to invite lawsuits, especially with the IRS ramifications.
So what can your company do? Each company will need to respond to this opportunity differently, but there are some general points that hold true across the industry:
- First, confirm records and testing. Ensuring records contain recent testing data and performance measures allow manufacturers and distributors to rest on a foundation of proven data.
- Second, get a plan in place to avoid opportunities for misrepresentation. Clearly establishing for distributors what products meet the 30/30 rule allows manufacturers to avoid oversell and helps distributors to avoid misrepresenting characteristics to homeowners. We suggest the development of written communication guidelines and handouts. Limit the ability of a disgruntled buyer to someday “mis-remember” what was said.
- Third, avoid committing to the question of “Will I get a tax credit?” Manufacturers and distributors of window products can control and represent what result has been obtained when their products were tested. They cannot give advice as to how the law will apply to third parties. Your representation that a product “has been tested and achieve results that meet the 30/30 standard” for a tax credit is wholly different than committing to the credit itself.
Will the stimulus address the economy’s ills? Our industry is being called upon, being given the opportunity to help. We should and will respond. Just never forget that you must be able to support performance representations, and be prepared to address the impact of those representations now and in the future.