IRS proposes using EPA database to verify 75% efficiency for tax credit

Industry is split three ways on question of eligibility.

July 2025 update: Congress revoked the wood heater tax credit as of Dec. 31 2025, ending what was meant to be a 10 year extension under President Biden. Expenses are eligible for stove purchases and installation of stoves prior to Dec, 31. 

Nov. 2024 - The IRS issued a proposed rule on October 25 to give guidance on how manufacturers can interpret“75% efficiency.” They are proposing to adopt the EPA database as the means of determining efficiency, which has been long expected by many in industry. 

The proposed rule is long-awaited by many who grew frustrated over the years that the IRS could not do what many felt was obvious: recognize the EPA efficiency listing. AGH was a prominent advocate for a uniform way to list efficiency as a way of protecting consumers, making a level playing field for manufacturers and instilling more faith in the industry. AGH often publicized exaggerated and misleading efficiency claims over the years.

Comments to this IRS notice are due by December 24, 2024 and a hearing is scheduled for January 21, 2025. The IRS notice can be found here.

Congress stipulated that biomass heaters at 75% efficiency, using the higher heating value, were eligible for a 30% tax credit, up to $2,000. However, Congress revoked that as of Dec. 31, 2025.

Most manufacturers were already using the efficiency numbers on the EPA database as the arbiter of which stoves or boilers were 75% efficient or higher. The EPA number is an average of the efficiencies on all the certification tests. But a few manufacturers chose to say their stoves qualified for the tax credit if any of the certification tests were 75% or higher.

The third faction, made up of masonry stove manufacturers, urged the IRS not to issue any further guidance, so that they could claim masonry stoves at 75% or higher could qualify even though they are not listed on the EPA database because they are not required to be EPA certified.

According to the Congressional Research Service, approximately 48,300 taxpayers claimed the biomass tax credit in 2023, making it the least likely tax credit that taxpayers claimed other than for home energy audits. There is no public data on how many biomass stoves and boilers were sold in recent years, but experts say that an average of 200,000 is plausible. EPA has the data but it is not organized or compiled.

Currently 67% of the 101 certified pellet stoves are 75% or higher, based on the EPA database figures and 45% of wood stoves are. However, 92% of cat and hybrid stoves are 75% or higher and only 15% of the 106 non-cat stoves on the market are 75% or higher.

The legacy of using efficiency to qualify for this tax credit, that started in 2008, raises many questions. Arguably, cleanliness is more important than efficiency when using wood, a renewable fuel that a substantial percent of Americans cut or collect on their own instead of purchasing it. The result is that stove manufacturers now focus more on efficiency, while sacrificing R&D to achieve incremental reductions of particulate matter. Congress controls the efficiency number, while EPA sets emissions levels, and a lower efficiency threshold could allow the EPA more leeway to set stricter emissions standards.

Most manufacturers did not submit comments on the proposed regulations. All comments can be found here. Among stove manufacturers, some manufacturers who make lower efficiency stoves (e.g. US Stoves) argued for the stricter definition of efficiency, while those making higher efficiency stoves (Hearth & Home Technologies) argued for a more lenient definition.

The comments by stakeholders outside the wood and pellet heating community provide an interesting snapshot into views on incentives for wood and pellet stoves and boilers. For instance, the American Lung Association does not support biomass stoves or boilers should be qualified energy property regardless of efficiency rating. The California Air Resources Board (CARB) and the Attorney Generals of MA, CO, DE, IL, ME, MD, MI, NJ, NY OR, RI and DC believe a full carbon lifecycle analysis should be done to better calculate an efficiency rating.

However, based on their comment and the sources in the footnotes, it appears that they are confusing biomass to electricity, rather than focusing on biomass heat. While this is a common mistake in the media, it is notable that whoever drafted this comment for these states also made it. Nevertheless, these states do not oppose the tax credit but argue that a stricter one could be better. No commentator suggested that only pellet heaters, that are consistently cleaner and more efficient, should receive the tax credit. A carbon life cycle analysis however, would most likely favor cordwood over pellets.

Support using EPA database

Alliance for Green Heat: The most reliable method to protect consumers, ensure that tax credits are
going to compliant models and create a level playing field for manufacturers is for Treasury/IRS to specify that eligibility is limited to units listed in the EPA Certified Wood Stove Database that have an overall weighted average efficiency of 75% or more using the higher heating value of the fuel. (AGH’s full comment can be found here.)

BPA, ACEEE, ASE: The most reliable method to protect consumers and to ensure that tax credits are going to compliant models is for Treasury/IRS to specify that eligibility is limited to units listed in the EPA Certified Wood Stove Database as having an overall efficiency of 75% or more using the higher heating value of fuel.

Blaze King: Our company has always viewed the overall efficiency to be the metric intended by the IRS as the qualifier for the 75% high heating value.

Travis: In the interest of efficiency and the preservation of resources, the IRS should rely on EPA’s database to confirm whether biomass stoves meet the 75 percent rating requirement.

US Stove Company: Therefore, for a biomass stove or boiler regulated by the EPA to qualify for the 25C credit, only the average “overall efficiency” is reported in the EPA Certification report should be recognized. In addition, this same efficiency number will be posted on the EPA Wood Heater Database, therefore easily verifiable. This will eliminate any question or “gaming” of the tax credit.

Support using any single test run

Hearth & Home Technologies: In our view, the Treasury Department and the IRS should issue guidance stating that biomass stoves meet the definition of "qualified energy property'' provided they have a "a thermal efficiency rating of at least 75 percent (measured by the higher heating value of the fuel as reflected in a single certified test run)." Providing this guidance will resolve the current uncertainty about how to meet the HHV requirement. By establishing the single test criteria, a greater number of biomass stoves could qualify for the tax credit, thereby giving consumers more affordable choices to replace noncertified heaters while burning an efficient renewable energy source.

Stove Builder International: Manufacturers should be able to qualify a property …provided this efficiency number is 75% or greater and can be found in the property’s test report. An efficiency number of 75% or greater should be obtained when the property is used at a combustion setting typically used by consumers. For instance, in the case of a wood stove, the products are typically used by consumers at the low setting. That is, consumers use their stoves in slow-combustion mode to get an “overnight burn”. The stove can be used at a higher setting, but this setting is normally recommended upon start-up only. The basis of their argument is that manufacturers will “make up any number they want.” This could not be farther from the truth. We don’t know where this paranoia comes from.

If the efficiency criteria do not offer enough flexibility and most non-catalytic wood stoves cannot qualify for the 25C tax credit, we feel that the IRS misses its objective of helping the middle class to switch to cleaner, more efficient biomass appliances.

Support current language without further guidance

Masonry Heater Association: the IRS not to issue guidance that conflates the regulations of different types of biomass heaters, potentially imposing the requirements of one category of biomass heater onto another category, for tax credit eligibility. For example, woodstoves must be on the EPA's certified list, EPA Wood Stove Database, to be legally installed; however, this is not a legal requirement of all categories of biomass heaters, e.g. masonry heaters. Masonry heaters are a category of biomass heating appliance that the EPA has chosen to defer regulating.

Tulikivi: we feel that guidance is not needed as the original text is clear enough and allows masonry heaters that meet the efficiency requirement to qualify for the tax credit despite not being on the EPA list of certified appliances

Support strict enforcement based on efficiency tiers

Comments Of The Attorneys General Of Massachusetts, Colorado, Delaware, Illinois, Maine, Maryland, Michigan, New Jersey, New York, Oregon, Rhode Island, And The District Of Columbia; The California Air Resources Board; And The Ramsey County, Minnesota, Attorney: With respect to Section 25C’s biomass provisions, we urge Treasury and the IRS to strictly enforce energy efficiency tiers to verify qualification for biomass stoves and boilers. Per British thermal unit (BTU), wood has about the same carbon content as coal, and, according to EPA, wood contains about 75% more CO2 per BTU than natural gas. As a result, wood that is harvested and burned for energy immediately increases greenhouse gas emissions—even where it is displacing fossil fuels. Biomass combustion also emits other harmful air pollutants, like particulate matter, which is connected to a multitude of adverse health consequences including premature death, cardiovascular effects, asthma, bronchitis, pneumonia, chronic obstructive pulmonary disease. To avoid inadvertently increasing greenhouse gas and other harmful pollutant emissions through biomass incentives, Treasury and the IRS should comprehensively evaluate lifecycle greenhouse gas emissions in calculating the efficiency rating of eligible biomass. If, however, Treasury and the IRS elect to rely on EPA wood stove certifications to demonstrate efficiency ratings, they should not allow certification based on test methods 125 and 127 (relying on ASTM 3053), which allow too much variability and manufacturer and laboratory manipulation.

Do not support including biomass heaters in the 25C tax credit

American Lung Association: The ALA recognizes that pollution from the combustion of wood and other biomass sources poses a significant threat to human health and supports measures to transition away from using these products for heat production. As such, we do not believe biomass stoves or boilers should be considered as part of a qualified energy property regardless of efficiency rating.

Other comments

Governor’s Office of NJ: Biomass stoves and boilers are a concern. It’s likely we would have difficulty supporting incentives for biomass but there may be cases that make sense.

Rewiring America: Treasury should structure the updated Form 5695 such that each product category (heat pumps for space heating/cooling, heat pump water heaters, biomass stoves, and biomass boilers) has its own line and can be tracked accordingly. This is crucial to track how many claims are filed for heat pumps and heat pump water heaters; otherwise, it would be impossible to distinguish between claims filed for heat pumps and biomass products.

Recommendations for California's wood stove replacement program

In the fall of 2022, the California Air Resources Board (CARB) published their draft guidelines for their annual wood smoke reduction program. The State legislature committed $5 million for the program that offers financial incentives for homeowners to replace older, high-polluting wood burning devices with newer, cleaner burning units.  The Alliance for Green Heat submitted the following comments, urging California to 1. focus first on households in more densely populated areas where the public health ramifications are the highest, 2. to consider the benefits of hybrid stoves over catalytic stoves and to expand the number of eligible non-cat stoves, 3. to make sure California fully integrates wood stoves into its energy audit and weatherization programs, which would lead to more voluntary stove removals and repairs, 4. and to study and better understand the actual carbon footprint of firewood based on estimates of how people source their wood.

Dec. 8, 2022 

Hon. Steven Cliff, 

Executive Officer

Channel Fletcher, 

Deputy Executive Officer, Environmental Justice

California Air Resources Board

1001 I St,

Sacramento, CA 95814

 

Dear Mr. Cliff and Ms. Fletcher,

Thank you for the opportunity to provide comments on your draft Program Guidelines to reduce wood smoke. Funds to replace older stoves with cleaner sources heat are funds well-spent, especially since many old stoves provide primary heat to homes of marginalized, lower-income households.  

1.      Focus on households in densely populated areas

Our biggest recommendation is to focus your resources on households in areas that are more densely populated and/or experience frequent weather inversions, where the public health ramifications of older wood stoves are the highest.  Stoves in very rural homes with few or no neighbors will have very few public health impacts. This is an area that more change-out programs should explore.  Hopefully, homes in these sensitive areas would opt for heat pumps or pellet stoves. For homes in densely populated areas, we would also encourage you to see if the home has a woodshed or a way to store their fuel.  

2.     Replacement devices

We fully support CARB’s decision to replace older wood stoves with low-carbon alternatives such as heat pumps and pellet stoves.  We would be wary to include electric resistance stove heaters because this may burden lower income homes with higher electric bills than they can afford, assuming electric rates rise in the future.  We are glad that CARB does not include gas stoves as that would have a counterproductive carbon impact and hinder electrification goals.

We do not have a high level of confidence in catalytic stoves as they often are not maintained or used properly as the years go by, especially in lower income homes who may not be able to pay to replace the catalyst when needed.  Hybrid stoves are a far better option, and we would urge CARB to focus on hybrid stoves because they still provide valuable PM reduction technology even if the cat is not engaged.  It is important to understand how stoves are likely to work in the real world, once they leave the lab, and cat stoves are a class of stoves that can work even worse than non-cats if they are not maintained or used properly, particularly after the home or stove is sold and the device is being operated by a new owner.  Some owners of older cat stove do not even know they have a cat stove.

We are extremely concerned that CARB is only making four models of non-cats eligible for change-outs. The four non-cats selected by CARB may operate better than some with greater testing flaws, but there is no proof that many non-cat stoves are just as good as the four you identify.  The process undertaken by the Alaska and NESCAUM was valuable in many ways, but it does not easily lend itself to being used to qualify stoves for change-out programs.  If CARB wants to identify non-cat stoves that would burn more cleanly, allowing more single burn rate stoves to qualify may be the best way.  However, most households do not want single-burn rate stoves, particularly if the stove is their primary heat source.  

A major dilemma for your program is that you are trying to serve many marginalized, lower income households and balance their legitimate energy needs with the impact their smoke will have on neighbors.  By choosing only 4 non-cats, you are sidelining the heating needs of these households in favor of a very questionable process to identify only 4 models, some of which are not likely to be available near these homes.

We support the effort undertaken by Alaska and NESCAUM but decisions like this, to select four stoves, takes their data beyond its usefulness. We think there is disconnect between limiting to 4 non-cats and serving low-income households.  Though we understand the desire to put Alaska’s work to use, it will likely be ineffectual in reducing PM in this change-out program. 

3.     Inspection, repair and safety

One of the best ways to start to identify, repair and/or remove old stoves is to ensure that local energy audits and weatherization programs have integrated wood stoves into their work.  Most energy auditors still do not have the training or the software to do undertake stove inspections, even though DOE and state regulations claim to require that all heaters are inspected.  If they did, they would find many self-installed stoves that are dangerous, higher polluting and in need of replacement or removal.  LIHEAP funding and low-income weatherization programs will cover these costs where the stove is the primary heat source.  If the stove is a secondary heater, these programs could cover repairs.  Few states have demanded that the US Department of Energy develop standards for inspecting wood stoves, like there are for boilers and furnaces, and the DOE is still hesitant to take this on, even though it would have a major impact for lower-income households across the country.  We urge CARB to review how wood stoves are inspected during energy audits and weatherization programs in California and see whether they are being repaired, replaced or removed.

4.     GHG reductions 

We are pleased that CARB is no longer using carbon to justify switching from a wood stove to a gas stove.  In its 2016-2017 Woodsmoke Reduction Program Guidelines, CARB stated, ”Switching from an uncertified wood stove to a natural gas or electric heating device reduces GHG emissions.”  We find this statement to be without scientific basis.  We understand that the GHG calculations are not central to how CARB runs this change-out program, but we want to open a conversation about it.  

In the current Program Guidelines, CARB seems to assert that 100% of carbon released from wood and pellets should be attributed to this form of heating.  The Guidelines say that “biogenic CO2 is included in the calculation of GHG benefits for these devices.”  We agree that some biogenic carbon should be included, as some carbon can be attributed to all energy sources.

To make scientific estimates of carbon released from firewood that would not have been released anyway, there is a lot of data that can be considered.  For CARB to start to gain a basic understanding of the carbon cycles from firewood, you could also ask on your change-out application, “where do you get your wood?”.  A researcher can also get data from a sampling of California firewood dealers and households who use firewood. 

By not engaging in basic research, CARB is putting the burden on low-income households who heat with wood and is inferring their carbon impact of their heating is far higher than it is. This flies in the face of current thinking about energy justice that seeks to remediate social, economic, and health burdens on those disproportionately harmed by the energy system. 

Estimating carbon from gas, oil and electricity involves a complex set of assumptions and calculations and there is no reason that similar effort could be made to assess the carbon cycle from firewood.

In California, as in the rest of the country, it is likely that a substantial number of homes who heat with wood acquire their firewood in a very responsible way by using dead and downed wood, as lower-income households do around the rest of the country.  A lot of firewood used for home heating could otherwise end up in the landfill where it would produce worse GHG emissions.  

The Minnesota Residential Wood Combustion Survey Results, (May 2019) done by the Minnesota Department of Natural Resources is one of the most definitive studies on firewood procurement and use.  The report says, “Most of the wood cut (84%) by residential households comes from dead or downed trees, land clearing, and logging residues (Table 15). Approximately 9.3% comes from live standing trees in the forest.”  This is a crucial statistic for understanding carbon impacts of firewood.  If 84% of wood cut by households comes from dead of downed trees, it means that carbon was already in the process of being released unlike when a live tree is cut.  

Household income generally correlates to how firewood is procured and how much firewood is used.  The lower the income of a household, the more wood they use and the more likely they gather their own wood, assuming wood is being used for heating, and not for recreation.  More urban and higher income families are more likely to purchase wood. The chart below is based on EIA data.

The Minnesota Residential Wood Combustion Survey Results, found that 60% of firewood is cut by households and 40% is purchased.

 

Table 15, below, provides further detail of where firewood comes from in Minnesota, and these trends are likely to exist in other states. 

Table 17 shows a breakdown of firewood from both household and loggers.  Even where firewood is provided by commercial loggers, most of it is still from trees that are dead, down or from the residues of a commercial harvest, which usually is for sawlogs (lumber).

In conclusion, we believe that whether firewood comes from a “locally or nationally approved” forestry plan is not as relevant as existing data about where firewood comes, how sustainable it is and how to understand carbon implications. From a carbon perspective, we believe a rigorous look at the carbon footprint across the value chain of gas production and usage will always be higher than the footprint of firewood, across its value chain. The Achilles heel of firewood is the excessive PM that comes from most wood stoves, and it is that PM which fully justifies change out programs like this one.

As we initially stated, we fully support this program and see it is improving over the years, and we hope that our comments help improve it in future years.  Thank you for undertaking the program and accepting comments from the public. 

Sincerely, 

John Ackerly

President

Further reading: State Parks give downed trees to public for firewood (March 2023)