Members

AHRI, in a letter to the Internal Revenue Service (IRS) dated May 29, 2009, provided recommendations for “safe harbors” related to tax credits for taxpayers who purchase and have installed furnaces that include advanced main air circulating fans (AMACF).  The letter followed consultations between AHRI staff, outside counsel and IRS staff on how best to implement recently enacted tax credits for the purchase and installation of these products.

IRC Section 25C, as amended by the American Recovery and Reinvestment Act of 2009 (ARRA), provides a tax credit equal to 30 percent of the cost of installation of an advanced main air circulating fan that is used in a natural gas, propane or oil furnace.  As furnace fans are not separately invoiced as a furnace component, AHRI and its members are concerned about confusion associated with the tax credit for furnaces that include AMACFs, but do not meet the requisite AFUE rating to qualify for a credit under section 25C for the entire cost of the furnace. 

To assist IRS staff in developing guidance with the goal of allaying this confusion, AHRI staff reviewed US Department of Energy (DOE) analysis of furnace and furnace fan costs and markups prepared in connection with rulemakings to update federal furnace efficiency standards. Based on this DOE analysis, AHRI provided the following recommendations to the IRS as “safe harbors” for the section 25C tax credit for the AMACF.  These safe harbors would provide two alternate methods of determining the tax credit for consumers purchasing furnaces with AMACFs that do not meet the AFUE rating to qualify for the credit on the entire cost of the furnace:  a flat rate credit and a percentage credit.  These are set forth as follows, for 1) gas (natural gas and propane) and 2) oil furnaces, with requirements for each type of credit and credit amounts.

IMPORTANT NOTE:

The Air Conditioning, Heating, and Refrigeration Institute does not advise on any personal or corporate income tax requirements or issues.  Information provided by AHRI on taxation issues, including information found in this statement, is for general information only and is not intended as tax advice for individual taxpayers.  Nothing in this document is intended to be used, and cannot be used, either (i) to avoid penalties imposed under the Internal Revenue Code, or (ii) for promoting, marketing, or recommending to another party any tax-related matter addressed herein. Taxpayers should consult their tax advisors for information appropriate to their particular situation.

1) GAS FURNACES

A)  Flat Tax Credit Amount Safe Harbor for Gas Furnaces

• The Taxpayer that pays for the installed furnace is entitled to a credit of $234.00

B)  Percentage Tax Credit Amount Safe Harbor for Gas Furnaces

• The taxpayer that pays for the installed furnace is entitled to a credit of 8.7% of the installed cost of the furnace.

2) OIL FURNACES

A)  Flat Tax Credit Amount Safe Harbor for Condensing Oil Furnaces

• The Taxpayer that pays for the installed furnace is entitled to a credit of $340.00

B)  Percentage Tax Credit Amount Safe Harbor for Condensing Oil Furnaces

• The taxpayer that pays for the installed furnace is entitled to a credit of 9.3% of the installed cost of the furnace.

C)  Flat Tax Credit Amount Safe Harbor for Non-Condensing Oil Furnaces

•  The Taxpayer that pays for the installed furnace is entitled to a credit of $257.00

D)  Percentage Tax Credit Amount Safe Harbor for Non-Condensing Oil Furnaces

• The taxpayer that pays for the installed furnace is entitled to a credit of 9.3% of the installed cost of the furnace.

For further analysis of the safe harbor proposals please see the attached, May 29, 2009 letter from AHRI to the IRS.