Biomass Appliance Tax Credit Slashed
Last night, the House voted 177 to 148 in favor of the $858 billion Tax Cut Compromise Package of 2010 that reduces the biomass heater tax credit to 10 percent with a $300 cap. The bill now goes to the White House for the President's signature. Another significant change that further restricts the tax credit for biomass appliances is that Congress removed the lower heating value measurement and only allows the credit toward the purchase price and not for installation.
Energy efficiency provisions were shortchanged even further by a clause that says the $500 tax credit is a lifetime maximum, meaning that if a homeowner has used this credit anytime since 2005, it cannot be used again. During the past two years, the credit up to $1,500 could be used regardless of whether the family has used the credit between 2005 and 2009.
The reduction to 10 percent tax credit affects all energy efficiency measures that had enjoyed 30 percent credit for the past two years. Many members of Congress felt the 25C tax credit program had cost the government too much money and should not be extended in its current form at 30 percent up to $1,500.
This setback for incentives for wood and pellet heating systems is a result of biomass appliances being considered an energy efficiency device instead of a renewable energy system. Solar, wind and geothermal systems still enjoy the full 30 percent tax credit with no maximum and are not set to expire until 2016.
"This creates a terrible double standard for incentives between renewable energy systems favored and affordable by the wealthy and systems favored and affordable by average American families," said John Ackerly, president of the Alliance for Green Heat. "Fortunately, we understand that Congress will be revisiting these tax credits again in 2011 and advocates for cleaner and more efficient biomass appliances need to be prepared," he said. Instead of using tax credits based on a percentage of purchase and installation costs, Congress is likely to consider performance-based credits.
This report prepared by the Alliance for Green Heat.