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Proposed tax credit raises bar for efficiency

Nathalie Weinstein
Dolan Media Newswires

Portland, OR — A 35 percent savings on a building project is a boon for any developer. But qualifying for a federal Building Energy Tax Credit as proposed in a bill by U.S. Rep. David Wu, D-Ore., would not be easy.

Developers’ buildings would have to be 40 percent more energy efficient than current Department of Energy standards.

Wu based H.R. 3659 on Oregon’s Business Energy Tax Credit, which gives tax credits for renewable energy projects, efficient residential construction and buildings that receive green building certifications.

The proposed bill applies only to commercial structures and would be available to developers across the U.S.

Wu introduced the legislation on Sept. 29 after several years of discussions with people in Portland’s energy and business communities on how to make Oregon’s BETC work nationally.

“The goal is to get more efficient buildings,” Wu said. “We tend to focus on efficiency in cars and trucks, but more energy can be saved in structures than can be saved in vehicles.”

The tax credit proposed in H.R. 3659 could be applied to energy retrofits of older buildings as well as new commercial construction.

Jay Coalson of Green Building Services said that to meet the bill’s efficiency requirements, developers will have to fundamentally change the way they plan their buildings. His company works with developers who want to create more sustainable and efficient buildings.

“With (a) 10 or 20 percent (increase), you’d be doing more status quo processes that can be decided on late in the process,” Coalson said. “But at 40 percent it’s going to be about creating a new set of priorities for the building, and integrating efficiency early on in the process. Developers will have to challenge the design team, manufacturers and contractors to hit a new set of standards, which is the point of the credit.”

Wu said that, initially, there are some historic restoration projects, such as changing out a building’s HVAC system, could qualify for the tax credit. He plans to further evaluate how the bill could be adapted to credit historic renovations as negotiations on the bill progress.

The 40 percent challenge isn’t necessarily a bad thing, according to Mark Edlen of Gerding Edlen Development. He said the incentive could lead to new jobs for carpenters and electricians whose expertise would be needed to perform energy retrofits and energy-efficient commercial projects.

“This sort of work requires a definite level of expertise,” Edlen said. “I think performing energy retrofits has an enormous potential for job creation.”

Wu said that in 2008 more than 800 jobs were created as a result of Oregon’s BETC, something he hopes will be replicated with his legislation.

If it were to pass, the program would be managed by each state’s Department of Energy and the credit would be capped at $4 per square foot to discourage developers from inflating construction costs. The federal bill, like Oregon’s BETC, would allow tax-exempt groups to make improvements and pass the tax credit through to for-profit businesses in exchange for a lump-sum payment.

“I think the concept of financially supporting the ability to have a high-performing building will be well received,” Coalson said. “The debate will be over where to set the standard; 40 percent is going to sound high to most people.”

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