The Heat is on for the HVACR Alliance
Lobbying for passage of the HEAT Act
If passed, H.R. 3515, the HVAC Expensing and Technology (HEAT) Act, introduced by Reps. Pat Tiberi, R-Ohio, and Ron Kine, D-Wis, will allow commercial building owners to immediately expense qualified HVACR equipment replacement under Section 179D of the U.S. Tax Code.
With a Democrat and Republican co-sponsoring this bill, there is an opportunity for bipartisan support to carry it through the legislative process. The bipartisan 2015 PATH Act signed by President Obama expanded and made permanent Section 179 expensing and removed an exclusion which prohibited the expensing of HVACR products, but there were classification issues with the IRS that prevented the provision for expensing HVACR units from taking effect. The HEAT Act would fix this discrepancy and allow small businesses to invest the capital necessary to bring down their utility costs and energy consumption.
The HVACR Industry Alliance — a national coalition of 11 national HVACR trade associations including ACCA; Air-Conditioning, Heating & Refrigeration Institute (AHRI); ASHRAE; Heating, Air-Conditioning, and Refrigeration Distributors International (HARDI); Sheet Metal & Air Conditioning Contractors National Association (SMACNA); and others — have been lobbying for years on behalf of this bill.
“In terms of years of this, God, I look back, and we’ve been at this for a long time,” said Barton James, senior vice president, government relations, ACCA.
Talbot Gee, CEO, Heating, Air-conditioning & Refrigeration Distributors International (HARDI) agreed. “For what it’s worth, I’ve been at HARDI for over 10 years now, and this has been something we have been working on almost that entire time,” he said. “This is our third or fourth bite at this apple, trying to get this thing completed.”
WHY THE PUSH?
The current depreciation schedule for HVACR equipment is 39.5 years. “It’s difficult for the industry to get the credit it’s due when it’s expected to perform on systems that are multiple decades old,” said Gee. “That needs to be corrected to give the industry a level playing field and a fighting chance to compete out there and show how valuable it really can be to both energy efficiency and cost savings in that commercial space.”
Additionally, manufacturers are constantly evolving equipment to be more energy efficient. By allowing commercial business owners to immediately expense equipment, they can generate cost savings, enabling them to reinvest that money in other growth initiatives.
“From the distributors’ standpoint, if you go to most of them that carry commercial equipment, and you look out in the outdoor portion of their facilities, it’s stacked high with commercial equipment that they’ve invested a lot of money in that contractors are ready, eager, and willing to sell and install,” said Gee. “The biggest barrier they face is the tax code. That should never happen in American business.”
The HVACR Alliance has been working tirelessly to gets this bill passed through legislation for the customer, the industry, and the planet, according to James. “As the environmental groups and others have worked on ramping up efficiency, the lifespan of equipment has been drastically reduced,” he said. “Equipment used to last for 20-plus years, and now, even with good service and maintenance, you need to prepare to replace your equipment in 10-12 years. So, having a depreciation schedule oover 39 years is doing a huge disservice.”
WHAT TO EXPECT
“From the industry standpoint, these are not products that people think about every single day until something goes wrong with them,” said Gee.
Because of this, contractors are going to have to inform and educate business owners of the opportunities they have to replace equipment and make the cost and energy savings upgrades that are available to them, according to James. “My advice [to contractors] is to start telling your customers about this to get them prepared,” he said. “It’s a slow drum beat — they have to build that momentum.”
There’s definitely going to be an education process involved, agreed Gee. “The fact is, there are however many hundreds of thousands of service calls on commercial rooftop units every year, and the contractors haven’t even been able to have a discussion about replacement of those units because, frankly, the tax code worked against them.
“It’s in our interest, and everyone’s interest, to figure out a way in those few chance you get in a building’s lifespan to get the right thing put in the right way at the right time,” Gee continued. “I think one of the huge upsides owners and contractors will see from this is now they’ll be able to install equipment that already comes right out of the gate with more advanced diagnostics and more advanced controls. Everybody is achieving a benefit from that.”
While the main benefit of the HEAT Act applies to commercial business owners, it creates a ripple effect that touches on contractors, distributors, and manufacturers. First and foremost, it allows business owners to upgrade to more modern and efficient equipment, which will, in turn, save money on energy bills and conserve energy. This creates opportunities for increased sales for all parties up the chain — contractors, distributors, and manufacturers. It also allows contractors to build better relationships with their customers by educating them and informing them of the opportunities available.
“The most immediate benefit is to building owners who can replace aging equipment with some of the new technology our manufacturer partners are producing and provide enhanced comfort to people in the building,” Jon Melchi, vice president, government and external affairs, HARDI, told The NEWS. “Secondarily, they’re going to save money on their utility bills. By saving money, they can now invest in people, projects, and all sorts of things getting sucked up before. Finally, the biggest benefit to the industry directly is that we believe this will expand opportunities for local manufacturers, contractors, and distributors.”
The HVACR Alliance believes that it is crucial to the HVACR industry and others that federal tax codes provide alternative depreciation scheduled that reflect actual equipment lifespans and allow for accelerated expensing while promoting quality installations and maintenance of energy-efficient equipment as outlined in one of their six main priorities presented to Congressional leaders and the Trump administration in a letter dated Jan. 6.
“Communication between the contractors and their distributors is so vitally important to make sure the distributors are prepared and ready to go and have equipment in stock that the contractors are going to be best at selling and installing,” Gee said. “We’ve had over 700 letters sent by our members to Congress lobbying for the passage of the bill. WE have no reason to believe the president won’t sign it.”
“It’s really important that not only the contractors step up and get involved and help us get cosponsors and get this over the finish line, but to get their customers involved too,” said James. “Shoe leather’s what makes success happen here in Washington D.C.,” he said. “We’ve [ACCA] been burning a lot of shoe leather.”
Publication date: 8/31/2017