Provided the clearances to combustibles is met there should not be any issue installing the unit in a closet. It is a catagory 4 appliance, direct vent sealed combustion and combustion air is taken from outside.
The requirement for water heaters not to be installed in closets used for storage is a dated requirement for a catagory 1 appliance with open flame and combustion air drawn from the space, and if it where in a storage closet the cubic feet of air requirement could not be controlled
and could lead to the production of carbon monoxide or fire from the open combustion.
Time for a code update.
Rinnai America
FF Models
This manual must be followed exactly.
1) Read the safety issues completely before installing the Rinnai Water Heater.
2) This water heater is suitable for residential water (potable) heating ONLY.
DO NOT use this water heater for space heating, combination space heating/
domestic water heating, or commercial water heating applications.
3)
The Rinnai Water Heater is not suitable for use in pool or spa applications.
4)
This unit is designed to be installed indoors using the proper vent piping to
exhaust by-products of combustion to the outside environment. Contact your
dealer or Rinnai for proper vent kits.
DO NOT
operate this unit without vent
piping connected. Exhaust gasses must be expelled outside the home.
5)
Maintain proper space around the unit for proper servicing and operation.
Minimum clearances from combustible materials are listed below.
Top of Heater
6
inches
Back of Heater
0
inch
Front of Heater
6
inches
Sides of Heater
2
inches
Floor
12
inches
Vent/Air Intake
0
inches
6)
Installer must install a Pressure relief valve. Pipe pressure relief discharge to a
drain or outside environment (See pressure relief valve section).
7)
The appliance should be located in an area where leakage of the unit or
connections will not result in damage to the area adjacent to the appliance or
to lower floors of the structure. When such locations cannot be avoided, it is
recommended that a suitable drain pan, adequately drained, be installed under
the appliance. The pan must not restrict combustion air flow