Senators Draft Bill to Extend Energy Efficiency Credits

October 4, 2010

U.S. Senators Olympia J. Snowe (R-Maine) aned Jeff Bingaman (D-N.M.) have joined together to release draft legislation that would extend  residential energy efficiency tax credits for two years.  The draft raises the maximum credit to $3,000, but establishes different criteria for windows than the .30/.30 requirements for tax credits set to expire at the end of the year. 

The draft also significantly lowers the amount of a credit for which homeowners would be eligible with their window purchases. Specifically, the initial draft creates two levels of credits for energy efficient windows. The first would provide a 10 percent tax credit, capped at $200, for windows that meet criteria close to Energy Star standards (See Table 1). The second would provide a 30 percent credit, capped at $1,000, for windows that meet the specifications of the Department of Energy's R-5 program in the North and North Central Energy Star climate zones and a new set of criteria for the Southern and South Central zones.

Climate Zone2010 Energy Star CriteriaDraft 10% Criteria ($200 max)Draft 30% Criteria ($1,000 max)
Northern.30/any*.30/.55DOE R-5
North Central.32/.40.32/.40DOE R-5
South Central.35/.30.35/.30.30/.25
Table 1–U-value is listed first and SHGC is listed second in each space.  *Current Energy Star also offers alternative compliance paths.

Other provisions highlighted in the "Reduce Energy Bills at Home Act" summary include an increase in the credit for energy efficient biomass, heating oil, and natural gas furnaces from the current cap of $1,500 to $3,000, which "acknowledges the fact that the purchase of expensive heating property can be a challenge for many homeowners."  To recognize "the importance of proper installation," labor costs of installing insulation would also be included as an eligible expense for the tax credit under the bill. 

The initial industry response to the bill has been mixed. "The Window & Door Dealers Alliance applauds the goals of the bill, but we do think it needs some important adjustments," says David Walker, WDDA vice president. "Specifically, WDDA members see the credits for windows, doors and skylights as insufficient and suggests that $1,500 and $3,000 caps for two levels of window performance would be more appropriate."

Rich Walker, president and CEO of the American Architectural Manufacturers Association, has spoken in favor of this type of legislation, but agrees that the specific provisions of the current draft don't serve as an effective incentive for homeowners looking to make energy efficient home renovations. "The untimely and poorly administered EPA Lead Renovation, Repair and Painting regulations have increased the cost of window installations to as much as $200 in some locations," Walker states. "Coupling those additional installation labor costs with an average $150 window purchase, the consumer would pay $350 and receive a paltry tax break of only $15. This is clearly not enough of an incentive to drive consumer sentiment toward energy-efficiency improvements and subsequently will do little to spur job growth."

At the first level tax credit level set for windows, AAMA's Walker objects to the current bill's "severe" reduction of the current 30%/$1,500 credit available now to 10 percent with a cap at $200 for some products.  He also questions why the bill allows products meeting the current Energy Star North Central and South Central performance criteria, but sets different criteria for the Southern and Northern climate zones, he points out.

"Any legislation that does not sufficiently address the prohibitive increase in labor costs associated with the LRRP cannot be considered as a viable tool to promote energy efficiency or claim to spark job growth," Walker notes. "AAMA will contact Senators Snowe and Bingaman to ensure that our position on the importance of modifying the existing tax credit to include all windows and skylights meeting Energy Star criteria and amending the tax code to extend this credit through 2011, are considered in any future legislation."

"Residential energy efficiency has been identified as the most effective strategy to enhance our energy security and save money on energy bills," says Senator Snowe. "The residential energy efficiency tax credits that currently provide a 30 percent tax incentive for the purchase of insulation, windows, and efficient furnaces and water heaters have been key catalysts in improving the energy efficiency of homes throughout the country. Furthermore, these policies have driven companies to produce the most advanced products current technology allows and must be extended."

In issuing the draft, the two senators note that they are currently collecting suggestions on improving the draft legislation and would welcome comments.  Noting that the current tax credits will expire at the end of the year, Snowe adds, "My draft legislation would build on the success of these tax credits by focusing tax credits on the most efficient products available, and expanding the credit for efficient heating systems. I appreciate the input from Senator Bingaman and look forward to further refining this legislation to ensure that this key energy efficiency driver is crafted to truly transform our existing houses in our country." 

"The current tax incentives have been extremely beneficial in many ways," states WDDA's David Walker. "In order to maintain the positive momentum on all fronts–improved energy efficiency, reduced need for foreign oil, improved business climate and job expansion. WDDA looks forward to working with the senators and their staff members to extend and expand the current credits."