The Yudelson Associates Blog: What's New

Saturday, December 16, 2006

Show Me the Money, or What the “Do Nothing” Republican Congress Just Did

In the “Tax Relief and Health Care Act of 2006, H.R. 6111, Title II – Energy Tax Provisions , the following tax credits and deductions were extended through the end of 2008 (from the end of 2007), effectively two years from now:

1. Energy efficiency deductions of up to $1.80 per sq.ft. for commercial facilities reducing energy use by 50%, measured by ASHRAE standard 90.1-2001 (as of April 2, 2003), for the year the property is placed in service. This is a great boon to high-performance buildings now in design or construction that will be occupied by the end of 2008. A $0.60 per sq.ft. deduction is available for partial compliance of the interior lighting, HVAC and building envelope, so that retrofits can qualify just for lighting efficiency upgrades, for example.
2. For the energy-efficiency investments by a public agency or school, the law provides for the design team lead to take the tax deduction. On a 250,000 sq.ft. high school, for example, the design team lead (typically the architect) could potentially qualify for a $450,000 tax deduction. Large design firms should especially take a look at this.
3. Builders get a tax credit per home (including manufactured homes) deduction extended to homes “placed in service” by the end of 2008, that exceed by 30% the standards of Chapter 4 of the 2003 International Energy Conservation Code in effect on August 8, 2005 (for a $1,000 credit, or by 50% for a $2,000 credit). Manufactured homes can only get the $1,000 tax credit. Energy Star labeled homes also qualify for a $1,000 per unit tax credit, in lieu of meeting the IECC.
4. Residential solar electric and water heating systems qualify for the 30% tax credit (maximum credit of $2,000 for each type of system), for systems placed in service by the end of 2008.
5. Business solar electric and thermal systems are eligible for a 30% tax credit, with no limit, for systems placed in service through the end of 2008.

All these provisions are in current law, which was due to expire at the end of 2007. With the one-year extension on the books, design teams now can move forward with including these systems for projects that will be occupied by the end of 2008.

We believe that the new Congress will extend these deadlines further in 2007, at least through the end of 2010, but that remains to be seen. We believe that the new Congress will take this and possibly more dramatic actions to lessen our dependence on imported oil and to reduce greenhouse gas emissions from buildings. Stay tuned, as the “greatest show on earth” convenes again right after New Year’s, with a new cast of leaders and a new, if shaky mandate from the public to set things right in a lot of spheres.

Source: Technical Explanation of H.R. 6408, etc., prepared by the Staff of the Joint Committee on Taxation, accessed December 16, 2006, at: www.house.gov/jct/x-50-06.pdf 2006 Tax Relief Act.

Posted by Jerry Yudelson on 12/16/2006 at 09:14 AM

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Monday, December 11, 2006

Are green homes endangered by market conditions?

Building industry insiders report to me that major homebuilders are pushing suppliers to lower costs by 10%, in a bid to keep some profits from new home sales. Does this mean that the growth of “cost-added” green homes is endangered? Energy-efficient products that cost more may be pushed aside by larger builders as the market slide in new home construction continues unabated. Major builders are reported abandoning long-time top-tier suppliers who try to pass along cost increases. With the top 10 homebuilders completing something like 35% of all new homes, is the growth of green building endangered, or will the growth move even more strongly to the mid-size builder, a firm that does perhaps 200 to 400 units a year, and who’s looking for the marketing edge the green differentiator could bring? One of the few bright spots reported to me happens when a small additional investment in energy efficiency can help a builder “over the hump” to claim the $2,000 federal tax credit for homes exceeding by 50% the baseline standard of the Energy Policy Act of 2005. Message: if your baseline home is already energy-efficient, you may be willing to spend an additional $500 to reap the $2,000 tax credit, so long as you think you can actually sell the home right away.

Posted by Jerry Yudelson on 12/11/2006 at 06:42 PM

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Wednesday, December 06, 2006

Should green buildings be mandated?

According to an article in today’s Washington Post, the Washington, DC, City Council will require private developers of more than 50,000 sq.ft. of new buildings and major renovations to meet the LEED certification standard by 2012. The Council rejected a request to also include the Green Globes standard in the requirement. According to the Post, the city of Pasadena, California, and Montgomery County, Maryland, have adopted similar standards. This raises a question: should green buildings, implying superior environmental performance beyond building code requirements, be mandated by government, or left to the private sector to decide when and where to build green? Is the specter of global warming significant enough to begin requiring all buildings to improve energy and environmental performance dramatically, no matter what the marketplace says? Or, in attempting to do the “right” thing, are local governments prone to overreact? What happens to a building that doesn’t get LEED registered or LEED certified? Does it not get a building permit to start construction, or at the completion of construction, does it not get a “certificate of occupancy”? These are great questions for lawyers to sort out. What do you think?

Posted by Jerry Yudelson on 12/06/2006 at 06:50 PM

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World’s Largest LEED Platinum (to be) building opens in Portland

How about a green building that uses 60% less energy and 50% less water than a conventional building, yet is built on a conventional budget? A new building that opened in Portland last week raises the bar for all other green buildings. See the story in the Portland Oregonian, from Sunday, December 3rd. The project team really used an integrated design process and took a lot of calculated risks in providing mechanical and electrical systems that came in 15% below the contractor’s original budget. The project’s developer, Gerding/Edlen Development of Portland, has some 30 LEED registered projects to its credit, mostly speculative office buildings, high-rise apartments and condo towers.

Posted by Jerry Yudelson on 12/06/2006 at 06:44 PM

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