For the first time since 1992, the United States has a new energy bill. After four years of debate, the House and the Senate passed the bill by sizable majorities in July 2005, paving the way for President Bush to sign the Energy Policy Act (EPAct) on August 8, 2005. The Energy Policy Act (EPAct), while falling short of making energy efficiency a cornerstone of the nation’s energy policy or helping the country wean itself off dependence on foreign oil, contains several important energy efficiency provisions that will help consumers and businesses save money and energy and provide incentives for energy efficiency improvements. These incentives are one of the highlights of the bill, and the Alliance has been happy to note that several of our long supported provisions, such as incentives for energy efficient home retrofits, new homes, commercial buildings, appliances, heating and cooling equipment, and hybrid vehicles, and hybrid vehicles, have actually been included in this bill.
We believe the incentives for efficiency improvements on commercial buildings may have some significant benefits for school facilities. The bill is currently written to say that a tax deduction of up to $1.80 per square foot is available to owners or tenants of new or existing commercial buildings that are constructed or reconstructed to save at least 50% of the heating, cooling, water heating, and interior lighting energy costs of a building that meets American Society of Heating, Refrigerating, and Air Conditioning Engineers (ASHRAE) Standard 90.1-2001. In addition, partial deductions of up to $.60 per square foot can be taken for comparable reductions from any of the three building systems—the building envelope, lighting, or heating and cooling system—that meets comparable targets to be set by the Internal Revenue Service (IRS). The deductions are available for buildings or systems placed in service from January 1, 2006, through December 31, 2007. To meet the goal of saving 50% on energy over a new building built to ASHRAE standards, while challenging, is certainly achievable.
In the commercials buildings category, the person or organization that makes the expenditure for construction generally receives the tax deductions. This is usually the building owner, but for some HVAC or lighting efficiency projects, it could be the tenant. How this incentive will benefit government owned buildings like schools is still unclear at this point. Conventional wisdom says that the builder or system designer would take the deduction and possibly pass the benefits on to the school in the form of lower costs. This requires the Treasury Department to issue regulations, which they are expected to do this summer. The following website (www.efficientbuildings.org) will post guidelines on this issue sometime in the spring. School facilities interested in seeing how the commercial buildings incentives will benefit them should follow this issue closely and monitor the above website for new developments.
Although Federal incentives are useful, school facilities should always check with their states and utilities to see what kinds of incentives they offer for building efficiency. In the State of California, for example, utilities can offer financial incentives if a new school design exceeds California’s energy code, Title 24, by at least 15% and up to 25%. State agencies like the California Integrated Waste Management Board have provided incentives for installing products made with recycled materials.
For general information on Federal tax incentives available to consumers, businesses, and residences, please visit http://www.ase.org/content/article/detail/2683 where the Alliance has provided detailed descriptions of the incentive. In addition, the Alliance has also formed a coalition of public interest non-profit organizations called the Tax Incentives Assistance Project (TIAP), which helps consumers take maximum advantage of the new Federal income tax credits. Information on the TIAP, including Frequently Asked Questions (FAQs) from consumers is available on http://www.taxincentives.org.
By Swarupa Ganguli, Sr. Program Manager, Alliance to Save Energy with research support from Shea O’Neill.