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Bailout Plan Includes Tax Incentives for Energy Efficiency

October 27, 2008

By B.J. Novitski

When the Wall Street bailout plan initially failed to pass in the House of Representatives in late September, Senate leaders Harry Reid and Mitch McConnell quickly amended it with sweeteners to attract more congressional votes. Among the sweeteners were several energy-related tax incentives that had previously stalled, primarily because the House and Senate couldn’t agree on how to fund them. The revised bailout bill, H.R. 1424, officially known as the “Emergency Economic Stabilization Act of 2008,” did pass and includes several items of interest to architects and their clients.

One is a five-year extension, to 2013, of the portion of the Energy Policy Act of 2005 that gives building owners a tax deduction of up to $1.80 per square foot for “greening” new or existing commercial buildings. For public buildings, the designers, not the owners, may claim the deduction. The law also extends, to 2016, the tax credits for 30 percent of solar investments. The credit for businesses now applies to public utilities, and for residential solar installations, the $2,000 cap has been removed.

In addition, the law provides new renewable-energy bonds—allocated to public power providers, cooperatives, and governments—to finance facilities that generate electricity from clean sources. New bonds to help state and local governments reduce greenhouse gas emissions and new tax credits for research and development also are in the mix.

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The American Institute of Architects (AIA) actively lobbied for the sustainability provisions that appear in the law. “One of the biggest barriers to green building is the initial cost,” explains Andrew Goldberg, the AIA’s senior director for federal affairs. “When the economy is not strong, this is even more of an issue. This deduction helps owners recover some of that initial cost.” He also notes that architects are more likely to use the deduction for greening public buildings because earlier this year, the Department of the Treasury clarified language in the 2005 Energy Policy Act to make its applicability to architects less ambiguous. Moreover, the five-year extension means that architects who have large projects on the boards can rest assured that the deduction will be available by the time construction is completed.

These incentives could lead to widespread adoption of energy efficiency measures in the U.S. construction industry, which could “really transform the marketplace,” Goldberg says. Could they also help bring the industry out of its current slump? “I think the overall challenge is still pretty great,” he says, “but every piece of the puzzle helps.”

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