Last week the House passed HR 6049, the Energy Tax Extenders Act of 2008, by a vote of 263-160. Included in the bill are important tax provisions that have been supported by the Air Conditioning Contractors of America.

HR 6049 contains $20 billion in tax credits, deductions, and other incentives for investment in renewable energy; extends more than thirty five expiring tax provision worth $27 billion; and includes another $10 billion for individual income tax relief.

It is the second bill passed by the House this year intending to create and extend tax incentives for energy production, conservation, and efficiency. The previous attempt was killed in the Senate because it proposed to offset the revenue losses by removing tax incentives on oil and gas companies.

Most importantly for the HVACR contractor community, HR 6049 extends:

for one year (until December 31, 2008) the $500 tax credit for homeowners who install qualified high efficiency appliances, such as furnaces, air conditioners, heat pumps, hot water heaters, and more;

the Commercial Building Tax Deduction (CBTD) which expires at the end of 2008 until December 31, 2013. The CBTD allows building owners to deduct up to $1.80 per square foot deduction for qualified efficient expenditures on their commercial buildings;

the 15 year straight line cost recovery for leasehold improvements and qualified restaurant holdings, including HVACR equipment.

HR 6049 also allows a $2,000 tax credit to homeowners for the installation of a qualified residential geothermal heat pump system installed between December 31, 2007 and December 31, 2014.

A real concern is the short term, one year extension of the $500 homeowners tax credit. While the extension would be retroactive to January 1, 2008, nearly half the term of the extension is already lost. Unfortunately, we will never know how many homeowners that purchased a new furnace, air conditioner, heat pump, or hot water heater since the beginning of the year would have opted for a higher efficiency product. In its delay in extending these tax cuts Congress has squandered a real opportunity to promote energy efficiency.

The future of HR 6049 is uncertain. It will be referred to the Senate where it will likely be amended, or folded into a S. 2886, a companion bill in the Senate that does extend the existing home improvement tax credit to the end of 2009. The White House has threatened to veto HR 6049 in response to offsets that include a temporary new standard deduction for property taxes.