The New Year brought the equivalent of the stock market crash of 1929 to the solar-heating industry. Companies nationwide that had worked around the clock installing sun-powered appliances in December saw their rush of customers stop abruptly in January. Many now are selling little or nothing.
Unlike the victims of the Depression crash, these business know exactly why it had happened: The tax credit that gives solar customers a 40 percent discount on solar equipment expired at the end of the year, along with numerous other provisions of the tax code. Congress failed to extend them before it adjourned for Christmas.
"If you're sitting there trying to keep your doors open and your cash flow stops, you've got a problem," said William C. Holmberg, legislative director for the Solar Lobby, a nonprofit research group.
Solar firms are in the same boat as companies with heavy research spending, companies that hire disadvantaged workers, utilities, taxicabs, and wind, geothermal and biomass energy businesses.
Also caught up in the tide is anyone who wants to have his employer pay for educational expenses this year, individuals who benefit from employer-provided legal services, university faculty members who live in school-provided housing, and ministers with parsonage allowances.
Each of these individuals or businesses benefited from a tax break that terminated as of New Year's Day. Congress often sets a termination date when it creates new tax loopholes; almost as frequently, it leaves the breaks in limbo when their scheduled expiration date arrives.
This time around, bills to extend some or all of these provisions were swept up in legislators' desire to leave Washington, the House bill overhauling the entire tax code, and politicking over the "reconciliation" package of spending cuts and tax increases, which ultimately stalled and had to be postponed until this year.
The fate of the tax provisions remains uncertain. Both Senate Finance Committee Chairman Bob Packwood (R-Ore.) and House Ways and Means Committee Chairman Dan Rostenkowski (D-Ill.) said before departing that they hoped to resolve the issues when they returned. But they have no clear plan to do so, and the two chairmen disagree on how the provisions should be extended.
"It's not good policy, what Congress did," said one executive of a solar company. "The shame of it is that the [solar] credit really emerged as a noncontroversial item. It just got hung up on other things."
Among those "other things" was the House's massive tax-overhaul bill, which modified some of the expiring provisions and permitted others to terminate. The Ways and Means Committee, in the waning days of the congressional session, approved a separate short-term extension bill that retained only those provisions already kept in the previously passed overhaul package. It was passed on the floor and sent to the Senate.
The Finance panel already had approved a measure sponsored by Sens. John Danforth (R-Mo.) and Lloyd Bentsen (D-Tex.) extending all the expiring provisions for seven months. The idea was to let the Senate choose which provisions it wanted to keep as it produced its own version of tax overhaul.
But the Senate extension was included in the reconciliation package, which, besides the spending changes, also included the retention of the tax on cigarettes at 16 cents per pack. When the bulk of the reconciliation bill became impaled on other political spears, the Senate ended up passing only the cigarette-tax increase and a Medicare measure.
An attempt on the floor to pass the House bill separately to extend the expiring tax provisions met with objections from Sen. Bennett Johnston (D-La.), among others, who feared doing so would decrease pressure to pass the reconciliation bill.
The Senate action generated some barbs from House members who approved the cigarette and Medicare changes the next day.
"I cannot make a judgment about what the other body will do," Rostenkowski said when asked on the floor whether the Senate would speedily extend the provisions when Congress returns in late January. "I do not think they can make a judgment about what they are going to do."
Rep. Bill Frenzel (R-Minn.) said, "It is beyond my ability to ascribe any rationale to actions of the other body. I think they are going to have to explain their own temporary dimentia. I cannot."
But Rostenkowski said he hoped Congress would retroactively extend the expired credits upon its return. Packwood also said it was his "hope" that expired credits could be restored retroactively.
Staff aides say, however, that there is no specific strategy to begin work on restoring the provisions immediately. Because little tax bills have a tendency to become big tax bills during the legislative process, minor measures of this kind often are attached to other vehicles to move them through the process quickly.
So far, no vehicles have become immediately obvious. The cigarette-tax extension expires March 14, but lobbyists for the various provisions consider that a long period of uncertainty for the many interests now in limbo.
"It really puts taxpayers in a crummy position," said Rachelle Bernstein of the Chamber of Commerce.
The biggest problem the chamber's members see, Bernstein said, is the expiration of the exclusion for education assistance, group legal services and van pooling. Without those exclusions, those employe fringe benefits are legally taxable income to the employe and taxes should be taken out of workers' paychecks.
The IRS has made no announcement on whether an employer should begin to withhold taxes on those expenses, and a spokesman said the agency has no plans to issue any statements on the expiring tax provisions.
The tax credit for research and development, which now covers 25 percent of yearly increases in R&D spending, would, like the fringe-benefit exclusions, be continued in modified form under the House-passed tax revision bill. The R&D credit also enjoys widespread political support in both houses, and representatives of high-tech industries said their actions and plans will not be significantly affected by the expiration if the hiatus is temporary.
"The decisions that were made on R&D spending for 1986 were made long, long ago, maybe a year to 18 months ago," said Charlotte LeGates of the Computer and Business Equipment Manufacturers Association. "We really do think it [the interruption] is temporary."
The impact may be felt more quickly among companies that hire workers under the targeted jobs tax credit. That credit pays for half the cost of wages up to $6,000 in the first year and 25 percent in the second year for workers from certain disadvantaged groups. The House extended the credit in its revision bill, but lobbyists for companies that use the credit say its absence could already be affecting hiring decisions.
Solar-industry officials find their situation somewhat ironic. The House tax-revision bill cuts back on tax benefits for other, competing forms of energy, especially oil and gas. But in the meantime, those industries can continue to enjoy the benefits of current law. Solar credits, on the other hand, were specifically retained in the House bill -- and dropped from the current code.