Small Business Incentives for the Inflation Reduction Act with Kara Saul Rinalda

The Inflation Reduction Act may have already passed but there are still lots of questions about the credits, incentives and rebates contained within, like:

  • How will the funds be distributed?
  • Which states will benefit most?
  • What’s the best way for contractors to ensure they can deliver these incentives to customers?

Today we hope to answer these questions and more, which is why we’ve brought the foremost expert on small business incentives for the Inflation Reduction Act onto the podcast: Kara Saul Rinaldi.

Kara is the principal and founder of the Anndyl Policy Group and she joins IDI’s Ken Allison in a wide ranging discussion on this important legislation. Kara and her group acted as a vital conduit between legislators in Washington D.C and home builders to make sure that the Inflation Reduction Act provided as much value as possible to contractors.

This podcast will help you better understand the incentives offered by the Inflation Reduction Act for contractors and other small business owners:

  • 1:53 – Updates on the Inflation Reduction Act?
  • 3:52 – Is money from the Greenhouse Gas Reduction Act only industrial or available to consumers?
  • 6:21 – Shaping policy for every stakeholder from contractor to consumer
  • 10:23 – What’s the difference between tax credits vs rebates?
  • 15:54 – What are some of the states that are most excited about the 179D?
  • 20:43 – Different states have different needs
  • 23:55 – How can you work with your state’s energy office to get these rebates on the streets?
  • 26:45 – What are some of the elements that are of particular interest to all of the contractors and manufacturers who are going to have to move this into the marketplace?

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Podcast Transcript

[00:00:00] Kara Saul Rinaldi
This is a lot of money. So we’re looking at it’s, you know, thousands and thousands of dollars that could be provided in incentives.

[00:00:11] Intro
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[00:00:51] Ken Allison
Well, I’m excited today to announce Kara Saul Rinaldi, our guest as the principal and founder of the Anndyl lobbying group that is who really brought through or pulled through the Inflation Reduction Act. They are the sole lobbying group really for the home performance industry and work for the Building Performance Association. But Kara Saul has been a lobbyist in Washington, DC for a long time and many of you guys may have even been on the calls that she set up for all of the senators and House representatives last year as we got on to try and help them pull this bill through. By the way, I want to start out by thanking you guys for your time and dedication to the industry. But for those of you who don’t know Kara, Skip and the Andyll Group, they have tirelessly, tirelessly fought for many years trying to get this bill through. So, Kara, first, absolutely. Thank you for what you’ve done here. This this was a massive work.

[00:01:52] Kara Saul Rinaldi
Thank you. It was it was a team effort. Lots of lots of folks in Washington, DC, lots of groups and companies came together to really press to get this legislation across the finish line. And and certainly this legislation belongs to Senator Van Hollen and Congressman now, Senator Welch, who really fought to make sure it was part of the inflation reduction Act.

[00:02:16] Ken Allison
So now that it’s passed umm there, I wouldn’t think that they were going to let it fall flat. Is the DOE and others excited about this?

[00:02:27] Kara Saul Rinaldi
Oh, yeah, absolutely. Once the legislation passed pretty immediately, the Department of Energy was looking at how to implement the legislation as were the state energy offices. The Homes Act, as well as the electrification rebates together, making $8.8 billion are all going to be administered by the state energy offices. So the National Association of State Energy Officials was also quick to begin dissecting the legislation, seeing how it could work for different states. At the same time, DOE is looking at what the guidelines are needed that will help to advance that implementation.

[00:03:14] Ken Allison
So what are the most recent updates or the most recent things you’re seeing on the Inflation Reduction Act?

[00:03:21] Kara Saul Rinaldi
We’ve seen a lot of RFIs, otherwise known as requests for information, where the administration um asks stakeholders and others to provide feedback on key questions that are raised by the bill. We have to remember that the Inflation Reduction Act was a budget reconciliation bill, which meant it was much more slimmed down in size and guidance than a typical authorization or tax bill. So a lot of the language that might have been in the authorizing bills was stripped out because it was didn’t have a budgetary need or or budgetary effect. So from the parliamentary rules of budget reconciliation, it just simply has less guidance. So that left it to the to the administration to to implement that guidance. And there was a greenhouse gas reduction fund of $27 billion. There is a request for information on that that we submitted on for the Building Performance Association, a number of companies and nonprofits. And so it’s been a very busy time. We’re expecting a request for information on the contractor training grants later this week. And then we’re requesting we’re expecting that the RFIs on the rebate programs early in January. So it’s been very busy and kind of rebuilding back that thought process from where the legislation was to getting to a place of implementation with the administration so that in 23’ we can see the funding roll out the door.

[00:05:03] Ken Allison
Now, you mentioned the Greenhouse Reduction Act. Is that mostly industrial or is that also consumer available money?

[00:05:13] Kara Saul Rinaldi
So the Greenhouse Gas Reduction Act is actually not there’s not a lot of guidance, as I said, in the in the IRA, but it’s $27 billion that is split into a few buckets and with a focus on providing the majority to disadvantaged communities. And we could talk about that for this entire time because there’s a lot there’s a lot to unpack there. But yes, it can be used for communities and for consumers. It just has to um it needs to go through likely at some sort of a financing mechanism to do that.

[00:05:50] Ken Allison
Well, I’m definitely going to side table that versus taking an hour. We may want to aim for that. We can always talk at the Building Performance Association show up in Seattle. But I know you’ve got a lot invested in this bill, but outside of your work on it, just as a consumer yourself, you know, as someone who lives in a building and obviously in a city, what does the inflation reduction act mean to you as a consumer? Have you have you thought about it like that?

[00:06:24] Kara Saul Rinaldi
Oh, every time I’m working on building legislation, I think of that. I think about it from, you know, because what? Nothing’s going to work unless it’s able to be accessible to those who need to access it. So whether it’s as a business owner or a landlord or as a consumer or as a renter, whatever position that you know, the consumer is in, we need to look at it through their eyes. And the contractor, I mean, in many cases, the way in which these rebates or tax credits might be imparted would be through an education effort between the contractor and the person and the customer that they’re serving. So we also need to make sure that that educator, that contractor who’s going to be sharing that information has something clear, concise and understandable and that they understand and want to participate in these incentives. So that’s always at the front of our minds when we’re working on this legislation. I say that now when we look at it, yeah, it’s complicated now because it is there’s lots of guidelines that need to be written understanding certifications, understanding measurements, evaluations, all of that. But what we need to do, while it’s complicated now, that’s fine. We live in complication. Policy is complicated, but when it gets down to the implementation, to the when the contractor is sitting across the table from the homeowner and that homeowner has something broken because that’s usually when the contractor gets called and they need to get that heater working because their their kids are cold or the air conditioner working because their kids are hot. That is when, you know, sitting down at that kitchen table, that’s when we need to have it simple and that’s when we need to have it clear. And so we’re always looking at how to make it as clear as possible to that consumer.

[00:08:27] Ken Allison
I’m thinking outside of the realm of something broken, though, from people in your circle of influence, how would you gauge their reaction to the incentives? Do you see it motivating them to do a project? Is it our thing? Are the wheels starting to turn? Do you think we’ve done enough where consumers might actually be moving that direction along with contractors trying to educate them?

[00:08:52] Kara Saul Rinaldi
Yes. I mean, I think this is a lot of money. So we’re looking at potentially thousands of its, you know, thousands and thousands of dollars that you that could be provided in incentives. We’ve got, you know, up to $2,000 in a tax credit for a heat pump. We’ve got up to $2,000 for a home performance just making a home 20% more efficient, $4,000 if it’s 35% more efficient. And that’s not even including income qualified. If you make 150% or below area median income, you know, you can also have access to those electrification rebates that go up to $8,000 for a heat pump. So there’s I mean, $8,000 is a lot of of of money and particularly for lower income families. But really for anybody, $8,000 is a lot of money. So I do think it is motivating. And in fact, right now, this second, maybe even a little bit too motivating because they’re not available. Not yet. We have to make sure the rules are the rules have to be issued by DOE and then the state energy offices have to submit their plans and then which need to get approved. The money needs to go to the states. The states need to establish a program. So there are some steps that need to be taken before those rebates hit the streets. So it’s important that homeowners understand that.

[00:10:18] Ken Allison
I’d have to say as a contractor group, pent up demand is absolutely beautiful. But so tax credits versus rebates. I know we’ve got the 25C and we’ve got. So can can you just cover really quick a tax credit versus a rebate and, you know, available now versus available later? Right now we can use the 25C, but in January or I should say January 1st, it really becomes something greater to the contractor and everyone involved. But that’s changed that change is that just work that starts after 1/1/23, yes?

[00:10:58] Kara Saul Rinaldi
The expectation is yes after 1/1/23 for the 25C tax credit right now you can take it. It’s just not as it’s not as robust. It’s 10% to $500. Whereas the starting in January, it will be 30% up to either $1200-$2000. You know, the combo of the two, depending on how much upgrades and what upgrades you take, it’s a but those tax credits should be available starting at the beginning of January. We don’t have yet the rules that surround the 25C tax credit. So we’re all kind of waiting with bated breath on that. But yes, the expectation is it would start in January. The rebate programs, those are the ones that first need DOE guidance, state plans, and then the money to be provided to the states to implement the plans so that those are the ones that need a few more steps. And, you know, the real difference between those two is, you know, in general, we think rebates are better than tax credits. Tax credits are better than tax deductions because what is it? You know, it gets you the amount, the funding more quickly. Right? So if you take a tax credit in January 23rd, you’re not actually going to get that credit until you file your January 23 taxes, which would be in 24, whereas a rebate is it comes quicker. So technically, one might say if you’ve got the if you get the tax credit in January or whether or not you get a rebate next December, you potentially you’re getting you’re actually getting the money, you know, before you’re getting the rebate, before you’re getting the credit, even though you you had it that your project happened almost a year earlier.

[00:12:51] Ken Allison
I’m glad you said that, because that also brings up another thing. You know, most of our guys are insulators. And the truth is with the rebate and the programs that, you know, may kick off, we’ll just say July, September, October, those their labor is included. Is there any talk about including labor in the 25C? And the reason I ask is you almost have to play like a waiter or waitress. You have to check build. I don’t know if you know what I mean by that, but I literally have to sell them a lot if I’m going in and air sealing and adding insulation, I’ve got to get them up to $3,600 for them to be able to cover that. But it’s got to be in materials. So now we’re talking a seven, eight, $9,000 insulation job as opposed to if it included Labor. It’s very easy to do smaller homes and then to capitalize on it. Is there any conversation around that?

[00:13:50] Kara Saul Rinaldi
Well, there’s a conversation around it and we were really hoping that maybe Labor could be fixed in a technical corrections bill, though, you know, the understanding is that that may not be considered a technical correction. This happened in the originally back in 2005 and the 25C tax credit I was there. I was involved in that in the original 25C legislation and EPACT And I will tell you that, you know, Labor wasn’t included originally. It got included later before it got included. Frankly, material prices kind of went up. You know, the market essentially addressed it where it was one of those projects that, you know, if it’s being installed, the materials cost a whole lot more. But the labor was free kind of thing, and the market just addressed it in a in a way. I don’t know that that is the best solution and the most efficient solution for market dynamics. But I do know that that happened after 2005 and then got corrected once once Labor was included later in later years. So how the market if the market is able to fix the the situation, we’ll just have to see.

[00:15:06] Ken Allison
I completely understand that. I was just afraid to say it.

[00:15:10] Kara Saul Rinaldi
Well, I mean, it’s not. I mean, we’d like to see whether or not we’d like to see the tax. Incentives, you know, address the real issue, and that’s what installation is. So I just know what happened in the past. I’m not saying I’m not recommending anything, and I’m certainly not an accountant. And so I cannot provide business advice or legal advice in any manner, shape or form. But I’m saying that that’s that is what happened after the when this was an issue in 2000, after the 2005 25C tax credit. So the tax credit has with and without labor changed market dynamics. And I’ve seen it happen over the course of the last 15 years, so I know it can happen.

[00:15:56] Ken Allison
Well, and I agree, the smell test really is are we doing the right thing for the consumer that needs it most? And I think that’s kind of where things tend to fall.

[00:16:07] Kara Saul Rinaldi
You know, everyone wants to see homes more insulated and more efficient. And we want contractors to be open and honest about their practices, and we want businesses to be able to run efficiently, you know, leave it to the market, the attorneys and the accountants to figure it out.

[00:16:29] Ken Allison
I like that. Speaking on commercial, because I absolutely love commercial retrofits. I just see buildings, you know, you walk in and everybody’s got that plug in heater under their desk. I see the 179D as one of the largest incentives ever offered to commercial building owners. You know, with the changes as a business owner yourself, you know what what do you see the one or you know, what is the 179D mean to you? And are you getting any buzz back on that one?

[00:16:57] Kara Saul Rinaldi
Well, absolutely. I mean, large scale builders and and those who work in on commercial buildings are absolutely looking at how can we, you know, put these tax credit to work for us in in our retrofit planning and our building planning. And because it does give some time horizon, we have to remember that one of the greatest things about the IRA is it extended these many of these tax credits for ten years. So it gives a real amount of not just robust incentive, but opportunity to plan, not necessarily have to rush and get something done in a certain period of time, but to actually put it into a large retrofit plan that sometimes takes time. And so I’m excited that um that this is a this is a tool in the toolbox of energy efficiency and commercial buildings.

[00:17:51] Ken Allison
I love that you said that because I don’t think to date I’ve pointed out the time horizon on there and the fact is, yeah, large commercial projects can take 2 or 3 years to plan out. So that that’s a great point. Now, are you seeing any states already paving roads on the rebate side where they’re really moving forward quickly? Or or are they all kind of in the same start up line at the same place?

[00:18:20] Kara Saul Rinaldi
They’re not in the same place. I think we all know that some states have robust energy offices that are fully well staffed and have a long history of experience in rebate implementation. And then we have some state energy offices with less staff, less history of of rebates and incentives and less, you know, political support for this these types of efforts. The challenge here is to provide rebate guidelines and rebate opportunities for every state, All 50 states, I hope, take advantage of the rebates and implement something to support their homeowners upgrades of their of residential property. I’m not concerned about the states, the New York and California who are too clear um clear states that have long histories of rebate programs and and expert energy offices. I’m more concerned about those states who have who have less robust offices and are still investigating how to implement the programs. I’m expecting that once all the rules are written, we can relatively quickly get to a. Some plug and play approaches for certain states. But but yes, some of them are starting at starting a behind the finish line, so to speak, and some well ahead.

[00:19:48] Ken Allison
So with that, I mean, you’re you guys are obviously the, you know, one of the key linchpins in all of this. Are you finding some of the states you didn’t expect that they’re excited to get this going?

[00:20:02] Kara Saul Rinaldi
I think all the states I’ve see being cautiously excited because there’s a lot of questions that are still out there that they need DOE to decide and they’ll be more excited once DOE has ruled on certain questions that are outstanding. I mean, every state I mean, starting I was I was just giving an example as to where the states are from an administrative capacity. But when we think about every state has different building stocks with different age building stocks that have, you know, had codes or didn’t have codes at different times. We’ve got different whether that is that strongly impacts performance, the performance of those buildings. And then also, you know, whether or not how well trained the contractor workforce is to be able to implement certain levels of of retrofit and home performance retrofit. So there are so many dynamics and fuel sources. I mean, there’s another big one. The the there’s a strong push for electrification and the rebate programs and the price of electricity and gas or delivered fuels is very different in different states. And how much that state is is dependent on on fossil or and or delivered fuels or not, there’s such a wide variety that that it’s really important for the states to be able to think about that. I mean that was really the purpose of making these rebates go through the state energy offices and go through the states is so that they had a leadership at the state level to make those decisions that best fit that state and make the changes to the program that would best fit that state. So we’re certainly hoping there’s a significant flexibility to be able to meet the needs of, you know, Hawaii as well as Maine, as well as Alabama, as well as, you know, Washington state. I mean, we’ve got, you know, such a such a diverse and rich history in the build environment in the country that it’s going to take a while to bring everybody up to a high level of decarbonization.

[00:22:25] Ken Allison
I wanted to ask if someone wants to help move their state program forward, what the best way is. But really, it sounds like the best way might be February and then jumping in. But but what would they do? Simply reach out to their state energy office or is there other things they can be doing in the meantime?

[00:22:44] Kara Saul Rinaldi
Well, the state energy office is going to be critical. And if you have ideas for how best to implement in your state, if you think you’re in a state that may not have a lot of encouragement to do these programs or might be reticent in any way, you know, provide that assurance that you want to see these rebates hit the streets and that they’re important. And if you’re a contractor that you want to be able to offer these rebates to your customers and certainly reach out to the Building Performance Association, we would love to hear from you. We want to know how these different efforts will be helpful. And we actually have a contractor survey out right now. And if there’s a way that Ken you can share it with your listeners, we would love to get that contractor survey out. We’re hoping that contractors will take the survey and there’s a set of questions that are specific to being able to establish the right guidelines and programs that would help a contractor. So please take that survey.

[00:23:52] Ken Allison
We can absolutely share that. And it led to one more thing I was thinking about when you were talking about the states. So then tribal councils, tribal offices, are those going to fall under the same? They’ll go to the state energy office because some of those cross state lines, you know, I’m thinking of like the Navajo Nation. They’re in more than one state for sure. They’re in the Four Corners area. And so, you know, that’s kind of where I grew up. So that’s just, you know, not selfish concern, but I guess so, um, are they along the same line? Do they have to work with four states or are the tribes on they’re under a different program.

[00:24:34] Kara Saul Rinaldi
No, no. Great point. And the state energy offices is the. So for the homes program. The homes program is explicitly for states and tribes. And, you know, working through the state energy offices that do work with tribal authorities. But the high efficiency electric home rebate program, which is the the homes rebate program, there’s $225 million, which is specifically for Native American tribes. So of the $4.3 billion, 225 million is set aside for Native American tribes. So the two rebate programs look at them differently. But the tribes are included in both with an explicit set aside in the rebate program.

[00:25:28] Ken Allison
Great. I’m glad that came to mind because we do have quite a few people that are working in those areas. So now are you seeing any companies or manufacturers gearing up to promote this or has anyone reached out to you on that side?

[00:25:44] Kara Saul Rinaldi
Yes, I think all of. I think everyone is looking at it and everyone’s thinking about it. And certainly the retailers, the Home Depot and Lowe’s are looking at it as well. So this is really across the board with, you know, companies and, you know contractors, manufacturers and retailers who are all trying to understand what the best way to implement those things that are tricky, you know, in. The implementation. I mean, Homes has a measured based approach to whole house. It’s a whole house performance based energy efficiency program. It’s whole house with a rebate based entirely on the actual savings, whether modeled or measured. Then we’ve got the electrification rebate, which is based on the actual thing, the, the, you know, the electrification enabling device or efficiency device that is that is that is being installed. But it has to be the rebate has to be provided at point of sale and it has to be income qualified. So there’s elements that I think are of particular interest. To all of the contractors, the manufacturers and retailers who are going to have to move this into the marketplace. And they’re all, you know, trying to figure out what is the best solution for them and, you know, how are their partnerships they need to they need to take into. Are there things that they need to do to make certain that they meet the rules as established by the law?

[00:27:23] Ken Allison
With that, there was also money set aside for training and getting people into the business. Is that mostly for nonprofit organizations or is that of interest to those of us already training contractors like IDI or our customers who may want to create an apprenticeship program?

[00:27:43] Kara Saul Rinaldi
So the contractor training grants are yes, they’re supposed to go through nonprofits, but I mean, the grants are supposed to be for contractors to train their, their companies. Now it’s $200 Million, which sounds like a lot of money because it is a lot of money. But when we think about how many contractors in this country need to be trained, it’s still a drop in the bucket. So I think that the Department of Energy and the state energy offices are all trying to figure out what is the most expedient way of getting of using that money to train contractors. The request for information that’ll be coming out later this week, those who are interested or have specific ideas as to how it would be best implemented please be sure to reach out to either respond to the RFI directly or reach out to those who are responding. The Building Performance Association, of course, will be responding.

[00:28:40] Ken Allison
I’ve got just two things to close with. One is there was a lot of incentive towards lower middle income. And so you you mentioned part of it earlier. But when we look at what is lower middle income, is it calculated by zip code, by county by region? Is it by state?

[00:29:02] Kara Saul Rinaldi
So it’s based on area median income via a HUD definition. So the Department of Housing and Urban Development has a definition for area median income. And so it’ll it’ll be based on that definition, but it is area median income. So that means that you know, San Francisco and Los Angeles are in different places. It’s a, there is going to be a there’s a difference because state median income is different than area median income. That’s another complication, but something that is, is already pretty well defined.

[00:29:39] Ken Allison
Great. And then the last one is I did see in the bill there is some money for code enforcement to update the codes across the nation. Can you address that at all? Because I know as insulators, we’re starting to see the 2021 code, which goes in some areas from, you know, being in the R30s to an R 60 in the attic. That’s a big jump. So I just wanted to ask you about that specific part of the money and what you’re seeing out of that code.

[00:30:12] Kara Saul Rinaldi
Enforcement across the country is always been a challenge. Whether or not a code was established in a state, it was sometimes a tree that would fall in the woods if there wasn’t appropriate enforcement to ensure that that code was actually being applied. Not just the opportunity to put in place new codes, but the resources to enforce those new codes is really critical to moving energy efficiency across the country. So, I mean, we’re still looking at for some detailed guidelines on that. But I know that for everyone, the $1 billion for code enforcement is, you know, was a welcome addition.

[00:30:55] Ken Allison
Kara, I can’t thank you enough for the work that you’re doing, the work that you’ve done and the work that still sits out there that is probably not going to leave your office for a while. But I really want to thank you for what you’ve done for our industry. We appreciate it. And certainly during these times it’s going to have a lot of contractors being busy for quite a few years.

[00:31:20] Kara Saul Rinaldi
Well, I’m looking forward to it. You know, I spent over a decade working to get this legislation across the finish line and these resources out to the industry. And so I’m looking forward at the next two years of making sure that every state has access to these to these resources and that we, you know, increase the energy efficiency of America’s homes and buildings.

[00:31:42] Ken Allison
And for all of you out there, if you have more questions about the Inflation Reduction Act or any of the things on our podcast, please reach out to your local branch, your local sales person or any of us at the corporate office where we look forward to earning your business every day.

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