Posted by: jeb1 | December 17, 2010

Fingers Crossed on Tax Credit Extension

The window and door industry hopes to get one more year of tax credits from the current debate in Congress about extending tax cuts.

By Jim Cory

Because tax credits for energy-efficient home improvements are set to expire Dec. 31, companies such as Regency Windows, in Cleveland, had promoted the idea that homeowners thinking about new windows should get them installed before the end of the year. Those TV, radio, and Internet promotions, says company president David Gordon, met with solid consumer response. So solid that since only products installed before the end of the year qualify for tax credits, Regency Windows has booked all the jobs it needs to keep its employee installers busy straight through the month, with holiday overtime. “We sold out our capacity,” Gordon says.

Last-Minute Flurry

But a flurry of last-minute lobbying activity and the accident of recent political developments, i.e., debate about extending the 2001 and 2003 Bush tax cuts, may give tax credits a new lease on life and give consumers once more a reason to buy windows.

On Dec. 1, a letter bearing the signatures of window, door, and skylight manufacturing executives from 14 companies went out to every member of Congress, requesting an extension of the tax credits created under the American Recovery and Reinvestment Act of 2009 (ARRA). The letter makes the case that the ARRA credit has allowed manufacturers to save or create jobs during the recession by encouraging consumers to buy qualifying energy-efficient products.

With both the Window & Door Manufacturers Association and the American Architectural Manufacturers Association, the industry’s two trade groups, pushing for it, a proposal to extend tax credits for energy-efficient products was included in a package of legislative extensions submitted by Sen. Max Baucus (D-Mont.), finance committee chairman. The Baucus proposal would extend and modify the 25c tax credits through 2011, with products that meet the 2010 Energy Star rating criteria qualifying for credits of 30% of purchase cost up to $1,500.

Final Form Not Yet Known

At the moment, neither the WDMA nor the AAMA is saying that an extension of tax credits is a foregone conclusion. “The Senate is moving closer to a compromise,” is how Jeremy Stine, of the WDMA put it. AAMA president and CEO Rich Walker called the possibility of a vote to extend credits “almost zero” for the remaining week that Congress is in session this year. “We are hopeful that the tax credit extension will be brought back shortly after Congress reconvenes in the New Year,” he says.

Nor is the final form that that extension will take completely clear. The extension could be for one year — the most likely scenario — or through 2012. Any extension could make 2010 Energy Star standards the qualifying criteria or might retain the 0.30/0.30 “one size fits all” standard originally set in place in June 2009, though Walker feels that “the industry has convinced many legislators that Energy Star 2010 criteria are more appropriate for the diverse climates in the U.S.,” and others agree.

All this is ambiguous. What’s clear at the moment is that an extension is on the table, and that if it passes it will likely be as part of a final agreement negotiated between parties for the purpose of extending the Bush tax cuts. “We think it will be for one year and will use the standard Energy Star criteria,” says Tyson Schwartz, vice president of sales and marketing for Gorell Windows & Doors, an Indiana, Pa., a manufacturer that was among those signing the Dec. 1 letter to Congress. Schwartz says that the ARRA tax credits played a big part in giving Gorell the strongest fourth quarter sales in its history in 2009, a number he believes the company will exceed in 2010. “We’d be naive to believe the tax credits didn’t have some effect,” he says.

Big Impact for Window Industry

The nature of the product and the aggressive marketing of many window replacement contractors made windows the biggest beneficiary of tax credit legislation. Many window replacement contractors have no doubt about the impact of the legislation on their businesses.

“The majority of customers we’ve worked with in the last two years asked for the tax credit right from the start,” Gordon says. At A.B.E. Door & Window, in Allentown, Pa., owner Jim Lett says that he saw interest in tax credits, and business resulting from those credits, throughout 2009, and in the last quarter of 2010. By late October the company had booked window jobs through the end of the year. “We had to tell people that if they were getting installed after January 1, they weren’t eligible for the tax credit,” Lett says, and even ended up losing some of those latecomers as a result. Lett says that he’d welcome an extension and he credits the 2009 and 2010 tax credits with helping to boost sales at his company, which has been hard hit by the recession. “If they can resurrect it,” he says, “that’s the way to go.”

—Jim Cory, editor, REPLACEMENT CONTRACTOR.


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