Spring 2010 issue of Horizons

Raise Your Expectations CERTIFIED PUBLIC ACCOUNTANTS AND BUSINESS CONSULTANTS

Tax Incentives for Building Green Green building has become more the standard than the exception with cap and trade policy, international climate summits and volatile energy prices in the current headlines. What is green building and how does it benefit the contractor and owner of jobs? Building green is the practice of increasing the efficiency with which buildings use resources while reducing adverse impact on human health and the environment during the building’s life cycle. There are many environmental, economic and marketplace growth benefits of building green. This article provides a review of the incentives and resources available to contractors and owners of green jobs. To help promote and set standards for building green, the United States Green Building Council (USGBC), a non-profit trade organization, was founded in 1993. The USGBC is best known for the development of Leadership in Energy and Environmental Design (LEED) criteria and classification for buildings. LEED is an internationally recognized green building certification system that provides building owners and operators a concise framework for identifying and implementing practical and measurable green building design, construction, operations and maintenance solutions. By Frank Hogg, CPA, and Chris Coleman, CPA, CCIFP

While not all LEED certified buildings and retrofits automatically qualify for tax incentives, there is a good chance that due to the overlapping nature of the LEED requirements and the energy-efficiency standards tax incentives utilize, a portion of the project will qualify. LEED rating systems evaluate environmental performance from a “whole building perspective” over the building’s lifecycle and assign one of four levels of certification: certified, silver, gold or platinum. Buildings assigned LEED certification are designed to lower operating costs, reduce waste, conserve energy and water, be healthier and safer for occupants, reduce harmful emissions, demonstrate an owner’s commitment to the environment, and qualify for tax rebates and other incentives. To encourage the construction of energy-efficient buildings and homes, the federal government and many state and local governments have passed legislation focused on energy savings and building green. One example of green federal legislation is Section 179D, originally enacted as a part of the 2005 Energy Tax Policy Act, which accelerates depreciation of building components. This deduction is available to commercial property owners, architects and contractors. For commercial buildings, Section 179D allows an immediate deduction for the full cost of energy- efficient commercial property placed in service during the taxable year. Normally these building components are deducted over a 39-year period. The incentive currently is available for eligible property placed in service before December 31, 2013. The amount of the tax deduction is the cost of the qualifying energy-efficient building components with a maximum total deduction capped at $1.80 per square foot of the building. “Building square footage” is equal to the sum of the floor area, including the basement,

26 u spring 2010 issue