CONSTRUCTION Accounting -
Reviewing EESA's Energy Tax-Break Extensions

Target Audience: Construction Industry Professionals, Construction Consultants, Homeowners, Homebuilders, Commercial Construction Businesses, Green Builders, Contractors, Construction Companies

This past fall, in passing legislation to bail out the struggling banking industry, Congress also acted to encourage contractors and owners to continue their efforts in energy-efficient building. The Emergency Economic Stabilization Act of 2008 (EESA) extended many tax credits and deductions for energy efficiency. Although this is hardly news, it’s still a good idea to review EESA’s changes as you work your way into 2009.

Tax Credit for Homebuilders

Contractors who build energy-efficient houses in 2009 are eligible for a $2,000 tax credit if the houses meet federally mandated energy-savings standards. The credit, which originated with the Energy Policy Act of 2005, got an additional year of life under EESA.

The credit now applies to new construction that’s sold through Dec. 31, 2009. To qualify, houses must achieve heating and cooling savings of 50% over a comparable house built to 2004 standards. At least 20% of the savings must come from improvements to the house’s envelope, such as windows and doors. Even better, you may claim the credit on a house you build for yourself.

The IRS requires energy savings to be certified before awarding the tax credit. Thus, you must submit statements from approved certifiers with your tax documents. The Residential Energy Services Network (RESNET) maintains a list of approved certifiers on its Web site (natresnet.org).

In addition to extending the tax credit, the legislation represents an extension of marketing advantages. As homebuyers become more attuned to environmental concerns, many prefer energy-efficient features in their residences, so you can use certification as a selling tool.

One caution: Although ENERGY STAR-rated products and homes are energy efficient, they don’t automatically qualify for the tax credit. The credit typically applies to the highest-efficiency products, which cost much more than standard products.

Commercial Building Tax Deduction

Congress was even more generous with incentives to owners and designers of commercial buildings. EESA extends the tax deduction for energy efficiency through 2013.

Contractors don’t qualify directly for the deduction of up to $1.80 per square foot, but they can benefit from the work the deduction may create. And, again, there’s a marketing opportunity in informing owners of this tax break and working with them to incorporate qualifying construction elements into their buildings.

Owners who build or remodel commercial buildings may claim the full deduction if they can meet the goal of saving at least 50% of the heating and cooling energy of buildings that meet 2001 standards. Those who incorporate energy-saving features into one of three systems, including the building envelope, lighting, or heating and cooling, may qualify for partial deductions of up to 60 cents per square foot.

Common Green Techniques

If you’re interested in integrating more green elements into your projects, check out the ENERGY STAR (energystar.gov) and Leadership in Energy and Environmental Design (usgbc.org/leed) Web sites. Both sites provide more information on common green techniques such as:

• Using reflective window film to reduce solar heat gain in warmer climates,
• Installing compact fluorescent light bulbs,
• Adhering to passive solar design to boost heating power naturally, and
• Opting for modular components, such as chillers and boilers, to optimize part-load efficiency.

For best results, consider using an energy-modeling program before construction begins to help determine the correct size and capacity for mechanical equipment, including HVAC. By splitting the building into zones according to thermal and mechanical requirements, energy modeling helps determine exactly what’s required to keep a building comfortable year-round.

A Fast-Growing Trend

Although it may seem intimidating at first, energy-efficient construction is a fast-growing trend that shows no signs of dissipating. In addition to helping the environment, green building offers marketing opportunities for contractors and cost savings for thrifty owners — and these advantages were made even sweeter with EESA’s extensions.

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