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There’s been much debate about whether the Inflation Reduction Act actually will help to drive down recordhigh inflation rates, but there’s no doubt that it represents a major victory for the SPFA and its members.
Billed by the White House as the "most aggressive action to combat the climate crisis," the IRA includes $369 billion in funding for clean energy and climate action. SPFA members are poised to benefit from several provisions, including improvements to the Residential Efficiency Tax Credit, the new HOMES program, and the Department of Energy’s electrification rebate program.
The IRA provides robust tax credits and rebates for homeowners who retrofit their homes to save energy, and SPF products offer the most effective and affordable way to accomplish those projects.
"The IRA is going to make SPF products more affordable for more people," said Dr. Richard S. Duncan, executive director of the SPFA. "This bill really opens up a lot of funding for these projects."
Here’s a snapshot of the IRA provisions applicable to the SPF industry:
- Residential Efficiency Tax Credit – Section 25C of the Internal Revenue Code provides homeowners with a tax credit to partially offset the cost of projects that increase energy efficiency. This credit had expired at the end of 2021, but the IRA reinstates it for 2022 and expands it for the next decade.
Prior to the IRA, homeowners were eligible for a tax credit equal to 10% of the cost of insulation materials, with a lifetime cap of $500 per taxpayer. The IRA increases the tax credit to 30% of the cost of insulation and air-sealing materials, up to $1,200 annually, beginning Jan. 1, 2023. Since the IRA passed the Senate through budget reconciliation, the tax credits and similar provisions sunset after 10 years, on Dec. 31, 2032.
The tax credit can be claimed annually, so homeowners can "phase in" their energy upgrades, Duncan said, choosing to install SPF insulation one year, a new HVAC system the following year, and new windows and doors the next year.
- HOMES program – The Home Owner Managing Energy Savings program provides $4.3 billion to fund wholehome efficiency upgrades. The tiered program offers rebates from the DOE that will be administered by the states.
Homes that achieve at least a 35% reduction in modeled energy consumption are eligible for a $4,000 rebate or 50% of the project cost, whichever is less. Homes achieving 20% to 35% energy savings get rebates of up to $2,000 or 50% of the cost, while homes achieving at least 15% energy savings will qualify for a rebate based on the number of kilowatt-hours saved, up to $2,000 or 50% of the project’s cost.
Multifamily homes are eligible, and states may increase rebates for lowincome housing. In addition, HOMES rebates can be combined with the 25C homeowner tax credit, enabling homeowners to essentially "double dip" on rebates, Duncan said.
- DOE electrification rebate program – The IRA authorizes $4.5 billion for state and local rebate programs covering home electrification upgrades, including insulation. It pays for the entire cost of insulation, up to $1,600, for households with an annual income less than 80% of the median income for local residents.
For households earning 80% to 150% of the median local income, the rebate will cover half the cost of insulation, up to $1,600.
The same conditions apply to multifamily units in which 50% of the residents meet the income requirement. This rebate program also may be combined with the 25C homeowner tax credit.
In addition to incentives for existing homes, the IRA improved incentives for builders and developers of new homes under the New Energy Efficient Home Tax Credit program (IRC Section 45L), as well as changes to the tax deductions for energy-efficiency improvements for new and existing commercial buildings under the Section 179D program.
More information on all of these programs can be found on the SPFA website: www.sprayfoam.org/2022_inflation_reduction_act.
When discussing energy-efficiency retrofits with homeowners, SPF contractors should consider a few significant yet simple projects, such as:
- Unconditioned attics – Installing SPF beneath the roof deck if HVAC equipment or ducts are present in the attic, or on the attic floor if there’s no such equipment there.
- Unfinished basements – Installing SPF on basement walls to limit moisture and exposure to soil gases such as radon.
- Crawl spaces – Replacing failing fiberglass insulation in crawl spaces or insulating crawl spaces that have dirt or gravel floors, creating conditioned or encapsulated crawl spaces.
- Exposed ductwork – Applying SPF to the exterior surfaces of ductwork inside the home, which often is uninsulated or inadequately insulated.
- Existing walls – While removing the existing interior or exterior walls would be highly invasive and costprohibitive for most homeowners, there are specialty SPF products that can be injected into existing walls to improve the building envelope.
"These are easy retrofits that our spray foam contractors can do," Duncan said.
The IRA also includes $200 million in grants for state programs that train contractors to perform home energy-efficiency and electrification improvements, another significant benefit for SPFA members.
"If they need some help in training new workers, there should be money available for that," Duncan said.
The SPFA plans to hold an informative breakout session about the IRA at the 2023 SprayFoam Convention and Expo in Daytona Beach, Fla., from Feb. 12-15. The association’s Building Envelope Committee also is looking into producing a webinar on the topic, Duncan said.
The IRA, combined with recent domestic and international events, should result in many more retrofit projects for SPFA members, Duncan said. Energy prices in 2022 are up sharply, and with winter weather driving up demand, prices are likely to increase further. That’s especially likely given that Russia’s war on the Ukraine is ongoing and the Organization of Petroleum Exporting Countries announced in October that it would cut oil production by 2 million barrels a day.
Large heating and electric bills should spur homeowners to insulate their homes and reduce their energy consumption, Duncan said. Furthermore, the Federal Reserve’s recent interestrate hikes have cooled demand for new homes, and with less inventory available, some homeowners will choose to stay put and upgrade their current homes.
"Everything is aligning for there to be a lot of retrofit work in 2023," Duncan said. "There’s going to be a big opportunity for spray foam contractors to get in front of homeowners who want to do these energy improvements."