Biden Signs Inflation Reduction Act — What Does This Mean for HVACR?
On 8-17-2022 President Biden signed the Inflation Reduction Act (IRA),
The bill extends several tax credits aimed at bringing down the cost of residential energy-efficiency improvements such as heat pumps, rooftop solar systems, and electric HVAC systems and water heaters. along with other forms of cleaner technology. It also includes incentives for companies to manufacture that technology in the United States.
ACHR News reports:
Reaction is mixed in the HVAC industry to the passage of the federal Inflation Reduction Act (IRA), a sweeping proposal aimed at addressing health-care costs and climate change as well as tackling the nation's deficit.
The bill, which will raise an estimated $737 billion through a 15% minimum tax on large corporations, increased tax-code enforcement, and other revenue measures, passed both houses of Congress by party-line votes in August and was expected to be signed by President Joe Biden on August 16.
Among its provisions are incentives for the use of higher-efficiency HVAC technology in homes and commercial and public buildings. But while those incentives are embraced by the HVAC industry, other facets of the IRA, for some, outweigh its benefits.
"Unfortunately, it looks like Congress chose politics over good policy in crafting this bill," said Alex Ayers, the government affairs director at HARDI, in an emailed statement.
"We are very disappointed with this outcome and will work tirelessly to impact the rule-making process to improve the impacts on America's HVACR contractors," said Barton James, the president and CEO of ACCA, which was among dozens of trade and interest groups lobbying against the act.
Both HARDI and ACCA objected to the legislation's funding of an expansion of the Internal Revenue Service, which they said will lead to more audits of small businesses.
"From ACCA member experience, we know many, if not most, of these additional audits will be conducted on the owners of family businesses who have fully complied with the tax code," James wrote in an August 8 letter to top Congressional leaders.
Association representatives are also wary of an extension of loss limitations that will keep pass-through businesses from fully writing off business losses. James contended that provision is intended to offset the potential revenue lost by exempting private-equity investors from the minimum corporate tax.
"The cap on active pass-through loss deductions is bad policy at any time, but it is particularly harmful when the economy is weak, and businesses are trying to keep up with inflation," he wrote in his letter.
Ayers also objected to the prevailing-wage and apprenticeship requirements attached to some of the tax incentives, saying they "will likely prevent full utilization of these tax credits with the current workforce issues facing the industry."
The incentives, Ayers said, had bipartisan support and would likely have been passed without prevailing-wage and apprenticeship rules.
HVAC manufacturers praised the IRA's energy-efficiency incentives.
"Trane Technologies is looking forward to helping our customers access incentives and rebates for energy-efficient HVAC solutions, including heat pumps, thermal management and storage, smart thermostats, and other sustainable innovations," said Paul Camuti, the chief sustainability and technology officer at Trane Technologies Inc., in an email.
At METUS, or Mitsubishi Electric Trane HVAC U.S., a joint venture, Jason Rosenthal, the vice president of marketing, said the incentives will boost the heat-pump market.
"The IRA pushes heat pumps further into the mainstream and closer to becoming the standard for heating and cooling our homes," he said.
According to a Senate summary of the IRA, of the $737 billion expected to be raised, $369 billion will be invested in energy security and fighting climate change, $300 billion in deficit reduction, $64 billion in Affordable Care Act improvements, and $4 billion in drought resiliency programs in the western U.S.
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