Taking a brief pause from Congressional debate over resolving the looming fiscal cliff and avoiding sequestration, the Senate Finance Committee held a hearing Dec. 12, 2012, to consider tax reform’s effect on federal energy policy, especially incentives to promote energy efficiency. The hearing sets the stage for this issue to be a priority over the next 12 to 24 months when Congress is likely to consider a larger tax reform package. NMHC/NAA submitted testimony that outlined how additional energy savings could be achieved through some expansion of the existing incentive program.
The apartment industry has benefited from current tax policy, which provides a commercial building tax deduction (Sect. 179D of the Internal Revenue Code of 1986) to companies when their properties achieve a set improvement in building energy performance. However,the current tax program favors more recently constructed buildings with newer systems and technologies. Many older properties are unable to utilize the full measure of the current deduction because they have difficulty achieving the requisite 50 percent improvement in building energy performance over the level specified in the 2001 version of the American Society of Heating, Refrigerating and Air-Conditioning Engineers (ASHRAE) 90.1 code. In many cases, it is technically or financially infeasible to meet these higher performance standards
In an effort to address the financial impediments, NMHC/NAA support additional improvements to energy efficiency tax policy, such as those outlined in S. 3591, the Commercial Building Modernization Act. This measure includes updated energy code references against which whole building performance will be measured, as well as a pathway for older properties to qualify for incentives that will help property owners make building system upgrades that will yield significant energy savings.
In our testimony, NMHC/NAA argued that an expanded tax deduction would be a powerful incentive to assist properties in undertaking deep energy retrofits, which, in turn, would lead to utility cost savings for residents. We also urged that the incentive be available for a minimum of 10 years to leverage private investment in qualified building retrofits and supported a provision that would enable certain property owners, such as real estate investment trusts (REITs), to allocate the deduction to a third-party involved in the project.
The hearing was chaired by retiring Sen. Jeff Bingaman (D-N.M.), chairman of the Subcommittee on Energy, Natural Resources and Infrastructure. Bingaman, along with retiring Sen. Olympia Snowe (R-Maine), introduced S. 3591 in September 2012. Sen. Ben Cardin (D-Md.) has already indicated that he will champion this measure in the next Congress.
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- NMHC/NAA Coalition Letter Urging Senate to Restore Provisions to the Tax Extenders Bill
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