Inflation Reduction Act: The Tradeoffs Aren’t Worth It

On August 11, 2022, the PHCC National Board of Directors voted to oppose the Inflation Reduction Act (IRA), the watered-down version of the Build Back Better plan. 

Nonetheless, the House of Representatives voted to approve the bill on Friday evening on a 220-207 partisan vote, after the Senate approved the bill the prior week on a 51-50 vote with Vice President Kamala Harris casting the tie-breaking vote. The President is expected to sign the bill into law today.

PHCC legislative staff is looking through the 700+ page bill to understand its full impact on contractors. Below is what has been learned about the pros and cons of this bill thus far.

What we like:

• There are tax incentives for contractors that perform work improving the energy efficiency of their customers’ homes and businesses, and tax credits have been increased for homeowners and business owners that invest in energy-efficient HVAC systems.
• Restrictions that limited those tax benefits only to those consumers that hired a contractor that uses apprentices and pays prevailing wage have been lifted, meaning customers can hire any qualified contractor to perform the work and be able to claim it on their tax returns.
• It intends to streamline the permitting process for oil and gas exploration, which means Americans can theoretically start leveraging more American resources to reduce our dependence on foreign oil and reduce energy costs.
• Upon the President’s signage, PHCC will keep you up to speed on how you and your customers can take advantage of these tax incentives. PHCC does not offer tax advice and you are highly encouraged to consult with a tax professional.

Tradeoffs that did not make this legislation worthy of our support:

• There are over $6 billion in taxes on natural gas exploration, and financial incentives for state governments and utilities to initiate or expedite plans to decarbonize their economies. In short, natural gas will become more expensive and Washington has promised state governments will save money by moving quickly to ban natural gas. Ratepayers’ gas bills will increase.
• Tax incentives for consumers who get a new furnace or A/C unit are much more heavily weighted towards those who seek to fully electrify their homes. This means the legislation picks winners and losers. The consumers who get the full tax benefits of improving their homes’ efficiency are those who have the means to electrify their homes. Consumers that swap out their old HVAC system for a gas-fired system or electric resistance heat system, even if those systems meet efficiency requirements, will get a lesser credit assuming they qualify.
• A last-minute deal before this legislation passed the Senate extends the cap limiting business loss write offs for the next two years. Any tax benefit contractors may receive from performing qualified work on improving the energy efficiency of customers’ properties will likely be offset by the limit on loss write offs.

PHCC determined that the incentives to accelerate energy policies alone were sufficient to warrant opposition and believes it is impiortant to maintain access to natural gas as a kep part of a balanced energy portfolio for consumers. This legislation's prevention of contractors from minimizing business losses during a period of grave economic uncertainty makes the IRA even more unpalatable.

Thank you to those members who responded to PHCC’s call to action last week and remember you can have your voice heard again on Tuesday, November 8.