NMHC/NAA Viewpoint The apartment industry supports the permanent extension of the Energy Efficient Commercial Buildings Deduction and the New Energy Efficient Home Credit beyond their 2016 expiration. We also urge Congress to improve the Commercial Buildings Deduction by establishing a sliding scale of energy improvements, which would help spur investment in energy efficient improvements in older buildings.
The apartment industry supports the permanent extension of two tax incentives, which expired at the end of 2016, to create financial incentives to support energy efficiency investments in commercial properties, including apartments.
First, the Energy Efficient Commercial Buildings Deduction (Section 179D of the Internal Revenue Code) lets owners of buildings with four or more stories deduct between $0.60 and $1.80 per square foot when they install certain energy efficient systems, including HVAC, lighting, and, or building envelope. Second, the New Energy Efficient Home Credit (Section 45L of the Internal Revenue Code) enables developers of new low-rise multifamily properties (three stories or less) to claim a $2,000 per-unit tax credit if those residences achieve a 50 percent energy savings for heating and cooling over the 2006 International Energy Conservation Code (IECC).
Lawmakers should not only permanently extend both of these tax incentives, but they should also enact reforms to make the Section 179D deduction more effective. Beginning in 2016, to receive the full tax deduction, property owners had to reduce a building’s total annual power and energy usage by at least 50 percent beyond the baseline requirements established by the ASHRAE 90.1-2007 building energy code.
This rigorous ASHRAE standard has made it difficult for older apartment communities to retrofit properties and claim the deduction. More than 70 percent of the current apartment stock was constructed before 1990, the era of the modern energy code. These properties could achieve meaningful reductions in energy usage, but even after making significant financial investments to do so, these older properties often still fail to meet the specific code-based performance benchmark.Lawmakers should expand the terms of the Section 179D deduction so property owners can qualify for the deduction by achieving significant, demonstrated improvements in energy performance relative to a building’s own baseline performance data rather than a specific energy code. A sliding scale of incentives could be pegged to certain, well-documented improvements in building performance. In turn, these investments will lead to greater utility cost savings for residents and will help create jobs. According to a June 2011 study, a reformed deduction could generate more than 77,000 jobs in construction, manufacturing and other sectors of the economy.
Investments in building efficiency can improve environmental quality, diminish reliance on fossil fuels and reduce pressure on rents.
Print Friendly Fact Sheet
- Senate Finance Committee Task Forces Focus on Expired Tax Provisions
- Apartment Industry Calls for Renewal of Tax Provisions Designed to Spur Energy Efficiency
- NMHC and NAA 179D Letter to Senate Finance Committee Cost Recovery Task Force - June 2019
- NMHC/NAA Coalition Letter Urging Senate to Restore Provisions to the Tax Extenders Bill
- Multifamily Industry Calls on Congress to Make Energy Efficient Home Tax Credit Permanent