As part of the budget agreement reached on February 7 to keep the government open, two tax incentives that support energy efficiency investments in apartments, which expired in 2016, were renewed through 2017.
The Energy Efficient Commercial Buildings Deduction allows owners of buildings with four or more stories to deduct between $0.60 and $1.80 per square foot when they install certain energy efficient systems, including HVAC, lighting, and building envelope. The New Energy Efficient Home Credit 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.
NMHC/NAA believe that lawmakers should not only permanently extend both of these tax incentives, but they should also enact reforms to make the Energy Efficient Commercial Buildings Deduction more effective. Specifically, the terms of the Deduction should be expanded so property owners can qualify by achieving significant, demonstrated improvements in energy performance relative to a building’s own baseline performance data rather than compared to a specific energy code.
The future prospects for these deductions are unclear. The House Ways and Means Committee has indicated it will be holding hearings regarding tax extenders, including energy provisions. Meanwhile, the Trump Administration released a Statement of Administration Policy that said, “The Administration is concerned with future extensions of special interest tax deductions and benefits in the wake of tax cuts and reforms that were enacted in December 2017.”
Finally, Congress strongly considered attaching tax incentives to expand and strengthen the Low-Income Housing Tax Credit (LIHTC) in this legislative package, but these were unfortunately not included in the final bill. NMHC/NAA will continue to advocate for strengthening LIHTC by making additional resources available to enable the production of new units and allowing “income averaging” to make the program more flexible and support more mixed-income housing.
- 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