Tax Incentives Go Green

The federal government and several states are offering credits to encourage sustainable development

Green-building proponents have had some success convincing government builders to embrace energy-efficiency standards; the GSA mandate for new LEED-certified construction is a case in point. Now the movement is infiltrating policy-making, as different governmental bodies float tax incentives for sustainable private development.

The Energy Policy Act of 2005 offers federal tax credits of $1.80 per square foot on all projects that meet ASHRAE standards. And according to previous legislation, businesses can receive up to 10 percent tax credits for employing solar and geothermal technologies. The Department of Energy also hands out several grants for businesses that experiment with new energy-efficient technologies. 

At the state level, Maryland, New York, Oregon, and Pennsylvania offer green-building tax incentives. New York, the first state to have implemented these programs, will give away $25 million between 2005 and 2009: Buildings that meet state standards, which are very similar to LEED ratings, will be credited for 7 to 8 percent of allowable costs over five years, with a cap of $150 per square foot for the base building and $75 per square foot for the tenant space.

Chicago and Seattle are also providing noteworthy tax incentives. Chicago is giving $5,000 grants to small businesses that build green roofs, and Seattle is giving $15,000 in incentive funding to businesses that build buildings which become LEED-certified. In general, says Paul Mendelsohn, AIA’s senior director for state and local affairs, cities have made greater strides in promoting green building because their smaller constituencies are less divided on the issue.

But these efforts still have a long way to go, Mendelsohn says, adding that business leaders are blocking more progressive measures because they still presume green building is costlier.

Among other attempts to further green the government, one piece of legislation pending in Congress would extend the Energy Policy Act’s tax credits beyond their current 2007 end date. The AIA also supports more green building-related legislation still pending in congress, such as the Enhanced Energy Security Act of 2006, which calls for greater and longer-lasting tax incentives for commercial green building than those the 2005 law provides. This also includes the High-Performance Green Building Act of 2006, which would require the government to establish green building standards for all federal facilities; and the Green Energy Education Act of 2006 (H.R.5644), according to which the curricula of architectural and engineering schools would focus on advanced energy and green building technologies.