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Bi-Partisan Bill Promotes Retrofitting

Friday, September 28, 2012

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Building owners who have said “no thanks” to energy-efficient upgrades, including building-envelope and insulation overhauls, may soon change their tune, if proposed federal legislation comes to pass.

A new Senate bill targets retrofits of commercial and multifamily buildings by streamlining an underused tax deduction.

Groundbreaking energy-efficient retrofit technologies were incorporated during the Empire State ReBuilding Program. The Senate bill may permit other buildings to join the retrofit ranks.

The “Commercial Building Modernization Act” (S. 3591), introduced Sept. 20, would “extend and improve” an existing federal tax deduction (Section 179D of the Internal Revenue Code) by leveraging vast sums of private-sector investment for technology-neutral, performance-based retrofits.

Supporters say the reform will also create 77,000 jobs and bolster the beleaguered construction industry.

‘Good Business and Good Policy’

Those retrofits might include replacing inefficient lighting systems, antiquated heating and cooling systems, roofs and windows, building-envelope and poor insulation systems, according to bill co-sponsors Ben Cardin (D-MD), Olympia J. Snowe (R-ME), Jeff Bingaman (D-NM), and Dianne Feinstein (D-CA).

“Energy efficiency is good business and good policy,” said Cardin, a member of the Senate Finance and Environment and Public Works Committees.

“The Commercial Building Modernization Act creates American jobs, saves money for businesses big and small, and ensures that our local communities have modern infrastructure friendly to the environment and ready for the future.”

Reforming Tax Code to Create Jobs

The Energy Efficient Commercial Buildings Tax Deduction (known by its tax-code section name 179D) currently offers commercial building owners a deduction of up to $1.80 per square foot for new buildings or renovations designed to use 50 percent less energy than the 2001 ASHRAE building code.

179D also includes a partial deduction of up to 60 cents per square foot for improvements within the building envelope, HVAC or lighting systems.

And although the deduction has been available for years (it was enacted as part of the Energy Policy Act of 2005), taking advantage of it has been “cumbersome and costly” for building owners when it comes to comprehensive energy-efficiency retrofits, according to the bill’s sponsors.

“As a result, the current deduction has mostly been used for partial building system upgrades—when used at all,” the senators said.

A reformed 179D tax deduction would generate more than 77,000 construction, manufacturing and service jobs and could potentially save building owners $1.4 billion a year on energy bills, according to a 2011 report by the Real Estate Roundtable, the Natural Resources Defense Council (NRDC), the U.S. Green Building Council (USGBC), and other energy and environmental advocacy groups.

Support from Energy Groups

The groups have strongly endorsed the bi-partisan bill.

“The Snowe-Bingaman legislation is exactly the type of forward-thinking policy America needs right now,” said Real Estate Roundtable President and CEO Jeffrey D. DeBoer.

“Saving energy is cheaper than producing energy. Modest incentives such as a reformed 179D tax deduction give us great bang for the buck in terms of creating jobs, saving businesses billions of dollars on utility bills, and leveraging private sector funds to enhance GDP and jump-start the sluggish economic recovery.”  

Moreover, the NRDC said, the legislation will allow the right people the right tools they need to make the nation’s building stock more efficient.

“This bipartisan legislation demonstrates how tax policy supporting energy efficiency and green building concepts in the places we live and work can create jobs and support innovation in the private sector,” said Roger Platt, Senior Vice President for Global Policy and Law at the U.S. Green Building Council.

The current deduction doesn’t expire until the end of 2013, so the bi-partisan bill is likely just the beginning of the conversation, according to the NRDC.