In early October, President Bush (or former President Bush, by the time you're reading this) signed into law the Emergency Economic Stabilization Act of 2008, authorizing the U.S. Treasury to spend up to $700 billion infusing cash into banks and buying up their troubled assets. While the financial bailout grabbed headlines, Division B of the same law, H.R. 1424, quietly ushered in a host of incentives for sustainable building and renewable energy. These could give a significant boost to green projects over the next several years.
For architects who do a lot of commercial work, the biggest news is that the energy-efficient commercial buildings tax deduction of up to $1.80 per square foot has been extended through 2013. This incentive, part of the Energy Policy Act of 2005, was originally in effect until the end of 2007 and then extended through the end of 2008. To qualify, the owner of a new or existing building must show that its interior lighting, envelope, or HVAC system reduces by 50 percent the minimum requirements set by ASHRAE 90.1-2001.
What matters is not just that the deduction has been extended, but that the extension is five years long. Before, says Anica Landreneau, the sustainable design practice leader of HOK's Washington, D.C., office, the tax deduction "wasn't really on track with the building design and construction cycle," because owners and their architects couldn't count on it still being law once a project on the boards had been completed (the deduction can be claimed only upon completion). Now, Landreneau says, "They've extended it to a long enough span that someone could design a more efficient building with this in mind, and deliver it by the date they need to [in order to] receive this benefit."
And here's a provision to make architects happy: In the case of a public building, owned by the government (which, of course, doesn't pay taxes), the deduction goes to the designer of the energy-efficient feature. This provision was in the original law, says Andrew Goldberg, senior director of federal relations at the AIA, but the Internal Revenue Service did not give clear advice on how to claim it. "We spent three years fighting to get the IRS to give specific guidance," Goldberg says, and in April 2008, the agency did state explicitly that architects were eligible.
Now that the provision has been both clarified and extended, expect to see "some really savvy public-sector clients, who say, 'Let's talk about an upfront reduction of fees.' It gives owners a little bit of bargaining power [with architects]," Landreneau observes. Yet it also spurs architects to design as efficient a building as possible, because the better it performs, the larger their tax deduction.
Another section in H.R. 1424 promotes renewable energy: The business tax credit for solar power and wind power will last through 2016. As before, businesses can claim a credit equaling 30 percent of their expenditure on fuel cells or wind turbines, and now the $2,000 credit cap on residential solar installations has been removed altogether. (The $4,000 cap on small wind turbines remains in place.) There is also a 10 percent credit for microturbines and geothermal and cogeneration systems.
If an owner can slice 30 percent off initial costs, says Landreneau, they start to look more reasonable, and could pay for themselves in savings over perhaps 10 to 12 years, as opposed to 20 or 30. Also, the federal law will have a compounding effect with local incentives: For a courthouse project it designed in North Carolina, HOK will try to sell the client on a solar roof array, to take advantage of both state and federal incentives. Likewise, Brian Geller, the sustainability coordinator for Zimmer Gunsul Frasca Architects (ZGF) in Seattle, mentions incentives offered by Puget Sound Energy as potentially attractive partners to the new federal ones.
Of course, the question on everyone's mind is whether the terrible economy will stymie the law's potential. Opinions vary. Goldberg, of the AIA, concedes, "This helps, but ... the challenges of getting credit are probably bigger than any one incentive can fit." Yet Geller and ZGF partner Bob Zimmerman see a silver lining: The design process slows down, too, and sometimes "things become better considered" than during a fast-moving market, Zimmerman says.
Whatever happens, at least there's a nice perk for architects who bike to work. Thanks to the bailout, employers can get a tax break for offering a $20 monthly benefit to employees who commute by bike. "Our HR group is looking to ... include it in the benefits package for next year," Landreneau says.