Capitol Hill

The residential energy efficiency tax credit (Internal Revenue Code Section 25C) has proved to be a popular and successful policy tool. NRCA and many in the business community view it as a jobs creator and market-mover for energy-efficient home technology and materials.

NRCA and other business groups contend the tax relief provided by the 25C credit helps spur greater levels of consumer activity. Simply put, providing homeowners with incentives for replacing their current roofing materials with more energy-efficient technology will result in more jobs in the roofing industry.

Meeting resistance

Originally enacted as part of broad-based energy legislation in 2005, the credit initially was written as a $500 lifetime tax incentive for homeowners' purchases of new, energy-efficient items such as qualifying energy-efficient doors, windows, hot water heaters and some roofing materials (asphalt and metal roofing products with certain pigmented coating or reflective granules).

In 2009, the credit was extended through 2010 and enhanced to include more types of roofing materials. Its value also was increased to $1,500. In late 2010, when legislation extended a host of expiring tax breaks, the credit was extended through 2011 but at its original $500 level.

Although there was some support in Congress to extend the 25C credit as part of a broader tax "extenders" bill at the end of 2011, Congress failed to garner the votes needed for final passage. The 25C credit, along with roughly 70 short-term tax measures, currently is expired, barring any effort to extend them retroactively later this year.

However, with the current political climate, there is uncertainty regarding the extension of tax incentives aimed at energy efficiency and renewable energy. The primary reason for this is the current budget situation has caused lawmakers to take a critical look at many "targeted" tax incentives in an effort to make budget cuts to reduce the deficit or pay for a potential tax-rate reduction.

Also, the energy policy landscape in Washington, D.C., dramatically shifted following the September 2011 bankruptcy of Solyndra LLC, the Fremont, Calif.-based solar energy technology manufacturer that received a $535 million grant from the Obama administration in 2009. After Solyndra failed, with taxpayer money at stake, any legislative proposal promoting renewable energy, energy efficiency or perceived support of so-called "green jobs" became a political nonstarter among many Congressional members.

Expanding the credit

Despite the difficult political and budgetary environment, NRCA continues to work as a member of a coalition of contractor trade groups, retailers and manufacturers working to extend the 25C credit through 2012 or beyond and expand it to increase its effectiveness.

NRCA and its coalition partners contend the credit is far more than an energy-efficiency tax incentive. The credit creates jobs for contractors and manufacturers and provides middle-class tax relief at a time when jobs and tax relief are valued policy goals.

Currently, the coalition is working with Sens. Ron Wyden (D-Ore.) and Lisa Murkowski (R-Alaska) to develop legislation that would extend the 25C credit for at least one year, expand the credit from $500 to $1,000 and broaden the list of eligible roofing products to include all items meeting the Department of Energy's ENERGY STAR® requirements. These modifications to the 25C credit not only would prevent the credit from expiring, but they also would restore the credit to a "market-mover" value.

The current $500 credit level is viewed by many as not being a sufficient incentive for consumers who choose to invest in potentially expensive upgrades, such as reroofing projects. Also, the broader range of qualifying materials would help streamline the credit, making it less complex and, therefore, more useful. Making the credit less prescriptive and more product-neutral would make it easier for homeowners to use.

Continuing advocacy

The fate of the 25C credit and many other energy-related policies is uncertain. If these reforms to the credit are not made retroactively later this year, there may be other opportunities for reforms, such as potential tax reform efforts, in 2013.

NRCA will continue advocating pro-growth policies that help create jobs needed for the roofing industry to recover in the current economy.

Brandon Audap is NRCA's director of federal affairs.