Mixed Reaction on New Tax Credits

March 3, 2009

The $1,500 tax credit established as part of the stimulus package is attracting some applause from the industry, as well as significant criticism. Notably, it appears some will advocate relaxing the .30 U-factor/.30 SHGC minimums established for products to qualify.

“Along with our members, we are asking the U.S. Senate and House of Representatives to reconsider these values, in light of their conflict with the proposed Energy Star U-factors and SHGC values and their application to appropriate regions in the United States,” states Rich Walker, CEO of the American Architectural Manufacturers Association. “The combination of the sour economy and the impractical product performance provisions of the stimulus bill present our industry with enormous challenges. Realistic and technically sound fenestration provisions in the stimulus bill can provide a much-needed boost to the remodeling segment of the marketplace,” he continues. “AAMA will be marshalling the grassroots strength of our members and their employees in the coming weeks to lobby for a catalyst rather than a tranquilizer.”

See a related story on discussions at AAMA's recent meeting, including Walker's perspective on the tax credit requirements.

While there is general approval of raising the amount of the tax credit available for windows and doors, many individuals and companies within the industry have expressed dissatisfaction with the 30/30 performance levels–“Slightly lower values would have opened up more manufacturers to the masses for less dollars, meaning more bang for the buck and a higher amount of windows being sold and installed, and more energy being saved overall heating and cooling,” writes one industry representative. “[It’s] Close but not as good as it could have been…”

"It's a great value in that they upped the credit and I don't mind the U-factor, but to totally contradict their own Department of Energy and the Energy Star program's direction to recognize solar heat gain as a valuable component is amazing and suspicious," says another industry observer. "As a small manufacturer in [Michigan], who's promoted hard coat high solar gain low-E for years, I'm terribly frustrated."

Some products may be out of the running altogether, not only for the current tax credit, but also thanks to the trend of tougher energy efficiency standards, some explain. “Wood doors and prehangers are seriously affected,” says a Canadian wood door representative. “A wood panel door cannot meet U value .35 or .30. As Energy Star thermal requirements increase and legislators look toward these requirements, the wood panel entry door will not be viable. In [British Columbia] we are faced with this situation. The wood door industry has negotiated a reprieve to Jan 2011 in order to develop a standard for a better wood door.”

Still, there is clearly support within the industry. Among the most noteworthy backers is Serious Materials, the Sunnyvale, Calif.-based company that not only manufactures high-performance windows and doors, but its committed to the ideas of green building and sustainability. “We are pleased with the tax incentive numbers. We believe they could be more stringent,” says Kevin Surace, CEO. “Right now, an R-3.33 window qualifies, we’d like to see it be an R-5 or above.”

One Kentucky dealer points out that while the credit may not cover the cost of the entire window replacement project, it will help nudge consumers into picking the better-performing products. “In our market, just about every other window company is selling windows that have a U-value of .32 to .35, if they sell their best window,” he explains. “I think this is what the industry needs to focus on more efficient products,” he explains. “I am leaving to contract a job with a homeowner after I finish this email. They had a quote from another company to do their windows with a low-E argon version for $5,700. My quote was $7,440. The [competitor’s] window had a U-value of .35 and a SHGC of .38 so it did not qualify. Ours has a U-value of .28 and a SHGC of .29 so it does qualify. After they receive their tax credit, their finished cost will be $5,940. The tax credit made it a much easier decision for these homeowners.”

In response to The Talk in the February 18 WDweekly, one reader wrote that window manufacturers would be wise to embrace the pending changes in the industry. “It is about time that the bar is high enough to finally reward the responsible stewards of the environment who manufacture and sell windows of value that save energy and put all the cheap guys on notice that times are changing—improve your products or get out of the business,” he writes. “There are lessons to be learned from the tribulations of the U.S. auto industry. We can’t continue to have a love affair with gas guzzlers any more than we can with residential windows ... I look forward to the bar even being raised higher in two years.”

“At Simonton, we believe that the tax credit incentive that is built into the economic stimulus package is an extremely positive step in helping consumers purchase products that will provide them with long-term energy savings and add value to their homes,” states Mark Savan, president of Simonton Windows. “We have reasonable expectations that the increased incentives for homeowners to make energy efficient upgrades will have a positive effect on business at Simonton Windows. We plan to fully support the opportunity with a number of initiatives.”

Simonton has already established a special Web page for consumers on the new tax credit, including specific information on products in its line that qualify. Although they have not made specific statements supporting the new measure, other manufacturers, including Andersen Corp., Gorell Windows & Doors, Marvin Windows & Doors and Pella Corp., have taken similar steps.

As a proponent of more stringent numbers, Serious Materials’ Surace says it makes sense to have higher performance requirements for the new tax credit than those currently established by the Energy Star program, considering the Energy Star requirements are going to be tightened soon. He believes the change from Energy Star to the 30/30 requirements that came into the stimulus bill at the last minute most likely came from the Department of Energy itself, along with members of Congress.

As for manufacturer concerns that the new numbers don’t take regional climate variations into account, Surace agrees that the solar heat gain could be somewhat lower in the North, but the ideal is not all that much lower, he says. He also suggests that the SHGC could be higher in Southern climates. In arriving at the numbers, he states, it was clear that legislators didn’t want to make this a complex process for the Internal Revenue Service.

The change in the tax credit requirements, along with many other energy efficiency related measures in the stimulus bill, Surace notes, reflect the priorities of a new administration, and the industry should prepare for more change down the road. Specifically, he predicts DOE will move more aggressively with the Energy Star numbers for windows and doors. With the new administration, he points out the department is now led by Dr. Stephen Chu, who previously led the Lawrence Berkeley Laboratory, including its windows and daylighting group. “He knows energy efficiency potential for windows is much greater.”

Energy Star officials at DOE declined to comment on the new tax incentive requirements, or any potential new developments in the Energy Star program for windows and doors. DOE does expect to issue its new Energy Star criteria for windows, doors and skylights this month, it was noted, however.