Headwaters (NYSE:HW) isn't TASER International (NASDAQ:TASR), but it's close. Both, you see, have major perception problems. For TASER, it's the assertion that its stun guns are too lethal. For Headwaters, it's that the company can't subsist without government largesse.

Neither is true, of course. But perception tends to equal reality in the surreal world of the stock market, which is based entirely on information (and, sometimes, misinformation). That's why I think these two stocks have been among the poorest performers in the Motley Fool Rule Breakers portfolio.

Yet that could soon change for one of them.

Headwaters yesterday reported outstanding results for its fiscal second quarter. Every one of its business units -- from construction materials to collecting coal waste to a unique coal-driven process for creating synthetic fuel -- grew by at least 20% year over year. Consolidated sales were up 21.3%. Net profit was up 84.5%. And per-share earnings, while lower than the Street expected, were up 53.8%, to $0.40 per diluted share.

In sum: I think it was a great quarter. But the miss is what's most intriguing to a Foolish shareholder like me. The shortfall, you see, had nothing to do with business performance. Instead, it was an accounting choice; management decided not to recognize approximately $10 million in sales tied to tax credits that may soon be phased out.

Here's why this is important: As recently as 2002, 90% of Headwaters' sales were derived from a process for creating synthetic fuel. It was highly lucrative because of the so-called "section 29" credit, a tax benefit aimed at encouraging alternative energy that was named after section 29 of the Internal Revenue Code.

Congress has been debating the merits of the section 29 credit for some time. It now appears that there is increasing pressure to phase it out. If that occurs, the benefit will simply expire in 2007. I believe this speculation over the impact of the phase-out of section 29 has weighed down Headwaters' stock price. Well, Fool, now we know. The potential impact is ... not much.

Headwaters' section 29 revenue would've equaled only 3.6% of gross sales. Now, to be fair, the company's chemical reagent tallied roughly $50 million overall. But even that was only 18.5% of Headwaters' adjusted Q2 sales, which means this is still a massive growth story, with or without help from the Feds. And that's not just perception, Fool. It's reality.

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Fool contributor Tim Beyers hasn't ever seen coal waste, but he's pretty sure his oldest son -- a wannabe construction worker -- would love it. Tim owns shares of Headwaters. You can find out what other stocks he owns by checking Tim's Fool profile . The Motley Fool has an ironclad disclosure policy .