Rusty Tweed Explains the Current State of Government Subsidies for Sustainable Construction

The Solar Core

Rusty Tweed Explains the Current State of Government Subsidies for Sustainable Construction

Rusty Tweed Sustainable Construction Subsidies

Sustainability is a popular trend in today’s construction industry. Sustainable construction means using fewer materials and reducing waste, along with the use of renewable energy sources like solar power. Sustainable construction is perceived to be more expensive than traditional construction, but this is not the case. Sustainable construction also includes using renewable and efficient energy sources and eschewing fossil fuels.

Fortunately, there are government incentives available for builders and property owners who want to boost the sustainability of their projects. Rusty Tweed, an expert in finance, real estate, and sustainability, explains the various federal incentives for sustainable projects, as well as selected state and local programs. He details how they can help your business save money while being more conscious of your impact on the planet.

Most of these programs are related to energy efficiency and renewable energy sources. These programs may be subject to change annually as a result of yearly budget requirements. Always make sure that you are working from current information before attempting a project under these regulations.

Green Building Initiatives

The following are federal programs promoting green or sustainable building and energy. These programs are constantly changing due to tax code and budget updates, so builders and developers would be well-served by checking on them at least annually.

Federal renewable energy tax credit programs for homeowners and commercial properties were first instituted in 2005. It was part of the Energy Policy Act of 2005 and was intended to expire in 2007. This program was so popular among lawmakers, it has been renewed several times since then.

Section 45L Tax Credit

One valuable program which has been extended through the end of the calendar year 2020 with retroactive application to the years 2018 and 2019 is the Section 45L federal tax credit. This credit is intended to provide incentives for builders of single- and multi-family homes to go green and reduce energy use in their properties.

Section 45L provides a $2,000 tax credit per unit of energy-efficient housing. It also provides for a certification fee credit of $400 per unit. A credit for manufactured homes is also available for $1,000 per unit.

For the Section 45L credit, the buildings must be three stories above grade or less, but they may include below-grade parking. Buildings must have wall insulation rated R-13 through R-19 and above, with a roof insulation rating of 38+. Double- and triple-pane windows are encouraged. Buildings should have insulated exterior doors. They should have air conditioning units rated 13+ by SEER, and they should have 80 percent efficient gas furnaces or hydronic heating systems.

Units must be certified by a company authorized by the Residential Energy Services Network or an equivalent. Certifiers perform computer modeling tests and also conduct on-site testing. They then create a certification package for the unit. They declare that under the penalty of perjury that the unit is certified under the rules of the tax credit.

Investment Tax Credit for Renewable Energy

The Investment Tax Credit is one of the premier incentives currently available for solar energy development. The Investment Tax Credit can be used by homeowners and businesses.

Systems installed before December 31, 2020 may receive a 26 percent credit on their federal income tax. In 2021, the program allows for a 22 percent income tax credit. The program is currently set to expire in 2022, but Congress may renew it for upcoming years.

The Investment Tax Credit covers the installation of new solar panels and equipment. The credit covers both residential and commercial properties. There is no cap on its value. Taxpayers should know that if they lease or rent the solar equipment on their home or business, they are not eligible for the Investment Tax Credit.

Certification for the Investment Tax Credit involves filing IRS form 5695. You will need to know the qualified solar electric property costs. This is the cost of the solar energy system after any applicable rebates. You may also add your gross costs of solar water heating, small wind energy, and qualified geothermal property costs. Taking 26 percent of the total of these figures will give you the tax credit you have earned. Bear in mind that the credit will decrease over time and may not be renewed in the future.

Selected State and Local Incentives for Sustainable Construction

Many local areas provide attractive income and property tax provisions for residential and commercial buildings which have been certified as energy efficient. Local area tax credits provide an important extra benefit to builders above and beyond what the federal government offers. This can be an advantage when stacking credits on top of each other to provide a favorable deal for any construction project.

The (Leadership in Energy and Environmental Design) program sponsored by the U.S. Green Building Council provides a strict set of requirements that states, counties, and municipalities use to certify buildings based on their green status. LEED applies to commercial and residential properties.

In Howard County, Maryland, commercial builders may receive a High Performance Building Credit on their property tax based on a LEED certification of Silver or higher. The credit applies to building and remodeling an existing facility. The credit is 25 percent for LEED Silver, 50 percent for LEED Gold, and 75 percent for LEED Platinum.

The State of Virginia has authorized its municipalities to offer property tax incentives
on many types of solar installations. Passive solar, solar water and space heating, solar thermoelectric, and solar photovoltaics are all allowed under the property tax credit.

Cities and counties currently participating in the program include Alexandria, Charlottesville, Loudoun, Prince William, and Winchester. Applicants in Virginia should contact their local building inspection office for help in determining whether their solar projects are eligible.

Another type of incentive is in place in Pittsburgh, Pennsylvania . In Pittsburgh, builders who adhere to high LEED standards are able to receive a bonus in building height or square footage when compared to their current zoning requirements. This can make buildings more profitable by increasing capacity.

Understanding Green Building Laws

The patchwork of green and sustainable building laws and regulations means that builders of residential, commercial, and industrial properties need to be in close contact with their state and federal regulatory agencies in order to receive the maximum credit or rebate they are due.

While sustainable and renewable energy projects are popular among environmentally-minded state legislatures, there have been few programs aimed at sustainable construction itself. Sustainable construction practices such as reducing waste, using environmentally friendly materials, and protecting the local environment are equally important to the industry.

As the technology develops, it is hoped that the federal government as well as state and local governments will begin to offer credits for sustainable construction materials and reduced waste. Sustainable buildings are the wave of the future, and as raw materials become scarce or prohibitively expensive, more builders will adopt waste-reduction and materials recycling practices.

Rusty Tweed understands that many builders and homeowners are looking for ways to reduce their income and property tax bills. When taking advantage of these incentives, homeowners and builders can feel good about their contribution to a healthy planet as well as the greater amount of profit from a building project.

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