Newspapers and airwaves are filled with news and commentary on the $700 billion (so far) bailout bill and Troubled Asset Relief Program for Wall Street (and now perhaps for Detroit).
One can’t help but wonder if there is anything in the bailout bill that might have some benefit closer to home.
Surprisingly, for local builders and developers, the answer may be yes.
Most of the perks added to the federal legislation come in the form of tax credits and deductions that can reduce the cost of certain building systems or provide incentives to buyers, including:
• Extension of the 30 percent tax credit to residential homeowners and commercial businesses that purchase rooftop solar energy systems.
More important, however, the new law removes the $2,000 cap on the tax credit benefit. With the cost of a rooftop system running as much as $30,000, a $9,000 tax credit would provide significant incentive to install these systems in new and existing buildings.
• Expansion of the tax credit to include geothermal heat pumps ($2,000) and small wind equipment ($4,000). While we might not expect to see windmills popping up in backyards and parking lots, geothermal heat pumps are a proven technology that will be much more cost-effective with the expanded tax credit.
• A refundable 10 percent tax credit of up to $7,500 for first-time homebuyers. The credit applies to single-family residences, including condominiums that will be used as a principal residence. This incentive could help local homebuilders begin to move some inventory.
• A $1,000 tax credit for homebuilders for each house that reduces energy consumption for heating and cooling by 30 percent and a $2,000 credit for a 50 percent reduction.
• Extension of a tax deduction of up to $1.80 per square foot to improve the energy efficiency of existing commercial buildings or to design new high-efficiency commercial buildings. A full deduction is available if the building is designed to reduce energy costs by at least half.
Smaller reductions in energy costs result in a smaller tax deduction. The tax deduction was set to expire Dec. 31, but it will now apply to commercial buildings placed in service prior to Dec. 31, 2013. This will allow commercial property owners more time to install energy-efficient lighting and other energy-efficient retrofits (such as HVAC systems) to take advantage of this tax incentive.
• Availability of the $1.80-per-square-foot tax deduction for design professionals (architects and engineers) for designing high-efficiency public buildings.
As with all benefits related to the federal tax code, there are conditions, limitations and restrictions that apply to each of these tax benefits. But many commentators expect the expanded availability of these incentives to have a significant impact on reducing the cost barriers to green building to help kick-start the moribund construction and building industry.
Thomas “Brad” Eriksen is a shareholder in Jordan Schrader Ramis’ Vancouver law office, representing business and corporate clients in all aspects of business operations. He can be contacted at 360-567-3903 or brad.eriksen@jordanschrader.com.
