OLR Bill Analysis
AN ACT ESTABLISHING A TAX CREDIT FOR GREEN BUILDINGS.
This bill establishes a tax credit for taxpayers who build green buildings, i. e. , buildings that meet certain energy and environmental standards. The credits can be taken against the corporation business, insurance company, air carriers, railroad company, utility company, and income taxes. The bill limits the credit for all projects at $ 25 million dollars.
The bill specifies the projects and their costs that are eligible for the credit. The bill entitles eligible projects to a base credit that increases with the project's rating. It allows additional credits for mixed-use projects and those located in certain areas. Taxpayers can only claim 25% of the credit in any tax years, with the remainder allowed to be carried forward for up to five years. The credits are transferrable and assignable.
The bill requires the Office of Policy and Management (OPM) secretary, in consultation with the revenue services commissioner, to adopt regulations, by January 1, 2011, to implement the bill. It requires the secretary, in consultation with the commissioner, to report to the governor and Planning and Development, and Finance, Revenue and Bonding committees by 2013 on (1) the number of taxpayers applying for the credits, (2) the amount of credits granted, (3) the geographical distribution of the granted credits, and (4) any other information deemed appropriate. A preliminary draft report must be submitted to the governor and the committees by July 1, 2012.
EFFECTIVE DATE: July 1, 2009, with the credits applying to income years starting on or after January 1, 2012.
ELIGIBLE PROJECTS AND ALLOWABLE COSTS
Under the bill, an eligible project is a real estate development located in the state that is designed to meet or exceed the applicable Leadership in Energy and Environmental Design (LEED) Green Building Rating System gold certification or equivalent standard as determined by the environmental protection commissioner. To be eligible, the project must have energy use of no more than (1) 70% of the energy use permitted by the State Building Code for new construction or (2) 80% of the energy use permitted by the state energy code for renovation or rehabilitation of a building. In addition, the project must use equipment and appliances that meet Energy Star standards, if applicable, for such things as refrigerators, dishwashers and washing machines. If a development consists of more than one building, only those buildings that meet these standards are eligible for the credit. In the case of a newly constructed building, the credits apply to buildings that receive a certificate of occupancy on or after January 1, 2010.
To count towards the credit, a development cost must be chargeable to the project's capital account. These allowable costs include, among others:
1. construction or rehabilitation costs;
2. commissioning costs;
3. architectural and engineering fees that can be allocated to construction or rehabilitation, including energy modeling;
4. site costs, such as temporary electric wiring, scaffolding, demolition costs and fencing and security facilities; and
5. costs of carpeting, partitions, walls and wall coverings, ceilings, lighting, plumbing, electrical wiring, mechanical, heating, cooling and ventilation. The purchase of land, any remediation costs, and the cost of telephone systems or computers are not allowable costs. The bill caps allowable costs at $ 250 per square foot for new construction and $ 150 (presumably per square foot) for building renovation or rehabilitation.
BASE AND SUPPLEMENTAL CREDITS
The LEED rating system has four levels, certified, silver, gold, and platinum, with a building's rating depending on its number of “green” features.
Under the bill, the base credit for new construction or major renovation of a building (but not other site improvements) that receives a gold rating under LEED is 8% of allowable costs; for buildings that receive a platinum rating, the credit is 10. 5% of allowable costs. For core and shell or commercial interior projects, the credit is 5% of allowable costs for a gold rating and 7% of allowable costs for a platinum rating. In all cases, the credit is the same for the equivalent rating under an alternative rating system, as determined by the environmental protection commissioner.
In addition, a project receives a credit of 0. 5% of its allowable costs if it:
1. is a mixed use development, i. e. . , one consisting of one or more buildings that includes residential use and in which no more than 75% of the interior square footage has at least one of the following uses: (a) commercial use; (b) office use; (c) retail use; or (d) any other nonresidential use that the OPM secretary determines does not pose a public health threat or nuisance to nearby residential areas;
2. is located in an enterprise zone or brownfield, as defined by statute;
3. does not require a sewer line extension of more than one-eighth mile; or
4. is located within one-quarter mile of a public bus service or within one-half mile of adequate rail, light rail, streetcar, or ferry service. (In the case of multi-building projects, at least one of the buildings must meet this criterion. )
ISSUANCE OF CREDITS
The OPM secretary must issue an initial credit certificate if he determines that the applicant is likely, within a reasonable time, to place in service property that would be eligible for a credit. The certificate must state (1) the first taxable year for which the credit may be claimed; (2) the maximum amount of credit allowable; and (3) an expiration date by which such property must be placed in service, which the secretary may extend at his discretion. The certificate must reserve the credit allowable for the applicant named in the application until the expiration date. The secretary may extend the reservation at his discretion. The secretary may not issue initial credit certificates for more than $ 25 million in the aggregate.
The taxpayer must obtain an eligibility certificate for each taxable year for which he or she claims a credit. The taxpayer must obtain this certificate from an architect or licensed professional engineer accredited through the LEED Accredited Professional Program or program the DEP commissioner determines to be equivalent. The document must certify, under the architect's or engineer's seal, that the building, base building, or tenant space for which the credit is claimed meets or exceeds the applicable green building rating system gold certification (or other certification the DEP commissioner considers equivalent) that was in effect when the building was certified. The certification must include the specific findings upon which it is based. It must state that the architect or engineer is accredited through the accredited professional program.
To claim the credit, the applicant must file (1) the initial credit voucher, (2) the eligibility certificate, and (3) an application to claim the credit with the revenue services commissioner. The applicant must send a copy of the documents to the OPM secretary.
TRANSFERS OF CREDITS
Under the bill, credits may be assigned or otherwise transferred. A project owner may transfer a credit to a pass-through partner in return for a lump sum payment. (This approach can be used if the project owner is a nonprofit, among other situations. )
Any subsequent successor in interest to the property that is eligible for a credit may claim it if the deed transferring the property assigns the successor this right, unless the deed specifies that the seller retains the right to claim the credit. Any subsequent tenant of a building for which a credit was granted may claim it for the period after the termination of the previous tenancy that the credit would have been allowable to the previous tenant.
LEED Rating System
The U. S. Green Building Council has established rating systems for a variety of developments. There are separate rating systems for new, and major renovations of, commercial, institutional, and government buildings; commercial building interiors; the core and shell of commercial buildings, which covers such elements as the building envelope and heating, ventilation, air conditioning systems; retail establishments; and health care facilities. LEED addresses a building's performance in five areas: sustainable site development, water savings, energy efficiency, material selection and indoor environmental quality. Participating buildings can be rated as certified, silver, gold, or platinum.
Planning and Development Committee
Joint Favorable Substitute