On August 8, President Bush signed a sweeping energy policy into law that has drawn both praise and criticism from around the country. After 5 years of debate, Congress finally forged a compromise that earned enough votes to pass, though the “something for everyone” nature of the $11-billion measure left many feeling that passage, not policy, was the end goal.
BOMA Intl. was actively involved in pushing real estate’s energy agenda - and it succeeded. Although BOMA did not take a position on the bill as a whole, the bill did include the long-sought energy-efficient commercial buildings deduction. While the cost and the duration of the program were scaled back slightly to fit into the budget parameters that Congress had to follow, BOMA is pleased to see that a significant tax deduction is available for upgrades to commercial buildings that meet performance criteria.
Specifically, the bill provides for tax incentives totaling $1.80 per square foot for energy-efficient upgrades that achieve a 50-percent reduction in annual energy costs to the user, compared to a base building defined by the ASHRAE/IESNA Standard 90.1-2001. Energy costs refer only to heating, cooling, lighting, and water- heating, since only these uses are within the scope of the ASHRAE standard and within the control of the building designer.
Partial credit of up to 60 cents per square foot will also be available for upgrades to each of the energy-using systems of the building - lighting; heating/cooling/ventilation; as well as water-heating systems and the building envelope. The Department of Energy (DOE) will promulgate system-specific targets to meet in order to qualify for the tax deduction. However, in the case of lighting system retrofits, until the DOE completes its final regulations, the system-specific energy savings target for the lighting system is deemed to be met by a reduction in lighting power density of 40 percent (50 percent in the case of a warehouse) of the minimum requirements in the ASHRAE/IESNA Standard 90.1-2001. Also, in the case of a lighting system that reduces lighting power density by 25 percent, a partial deduction of 30 cents per square foot is allowed. A pro-rated partial deduction is allowed in the case of a lighting system that reduces lighting power density between 25 and 40 percent. Certain lighting level and lighting control requirements must also be met in order to qualify for the partial lighting deductions.
Incentives will apply to both new and existing buildings, including offices, retail, warehouses, rental housing of four stories or more, and municipal buildings. These incentives apply to buildings or systems placed in service from Jan. 1, 2006, through Dec. 31, 2007. However, BOMA has already begun to communicate with Congress the need to expand this provision well beyond 2007.
Compliance will be determined by third-party inspectors who review the plans and the actual in-place construction. Energy savings are determined by software that must be certified by the DOE as meeting criteria of consistency and accuracy, following the successful experience of California’s performance-based energy code enforcement.
“This energy bill is a well-earned win for commercial real estate,” says BOMA Intl. Chairman and Chief Elected Officer David W. Hewett, Trammell Crow Co. “BOMA Intl. has long encouraged its members to adopt more energy-efficient building management practices, and this legislation provides another incentive toward achieving that goal. These near-term incentives will help moderate demand for natural gas, conserve electric power, and reduce the risk of electricity blackouts and price spikes.”
Now that the energy bill is signed into law, BOMA Intl. will continue its work with the DOE to implement the program and to educate building owners and managers on how to apply for the deduction.
Other provisions of the new law that directly and indirectly affect building owners and managers include research on intermittent elevators, energy conservation standards for commercial equipment, energy reliability provisions, promotion of bicycling programs, and many residential energy programs as well.
BOMA Intl. has earned a reputation as a leader in the pursuit of greater energy efficiency. In 2001, the association’s Board of Governors unanimously passed an energy policy calling on all members to take voluntary steps to reduce their energy demand. More recently, BOMA joined the Environmental Protection Agency (EPA) to challenge building managers to reduce their energy consumption by 10 percent in conjunction with the agency’s Energy Star® program. In 2005, BOMA Intl. introduced the BOMA Energy Efficiency Program (BEEP), an educational program designed to further assist building managers in streamlining their energy plans.
For more information on the issues discussed in this column, visit (www.boma.org) or call BOMA Intl. at (202) 408-2662.