Green Building: Advantages and Risks Business Reasons for Going Green and Financial Incentives

Driving Forces for Going Green Economics Awareness of global warming issues Desire for healthier living and working environments International green building influences Environmentally conscious – 75% of Americans consider themselves “environmentalists” Wall Street Journal – 87% of Americans say they are “concerned” about the environment Environmental Research Associates

State and Federal Financial Incentives State and Federal financial incentives are making green building projects viable Federal Financial Incentives ⁻IRC 179D Deduction ⁻Accelerated depreciation + bonus depreciation ⁻Investment Tax Credit State Financial Incentives ⁻Business Energy Tax Credit ⁻Oregon Property Tax Benefits ⁻Energy Trust of Oregon – New Building Efficiency Program, Existing Building Efficiency Program, Commercial Solar Electric Program ⁻Oregon Energy Loan Program

Federal Incentive Energy Efficient Commercial Building Deduction Section 179D of the IRC allows a commercial building owner to deduct part (or all) of the cost of certain “energy efficient commercial building property” placed in service after December 31, 2005 and before January 1, 2013, for an immediate deduction of up to $1.80/sf for commercial buildings that achieve a 50% reduction in total energy and power costs. – Reduction must be in comparison to ASHRAE Standard Property must be installed as part of one of the following components: – Building Envelope – HVAC – Interior lighting

Federal Incentive Energy Efficient Commercial Building Deduction Who Benefits? Whoever makes the investment and “places in service.” – Building Owner – Landlord Exception – for Government owned buildings, the Government may allocate the 179D deduction to designers. Deduction applies to: – New Construction – Renovations and retrofits – *Only applies to affected square footage – Building /improvements must be placed in service between ’06 – ’13 – Limited to the amount invested in the energy efficient property

Federal Incentive Energy Efficient Commercial Building Deduction

Partial Deduction Allowance – Up to $0.60/sq ft for Building Envelope – Up to $0.60/sq ft for HVAC – Up to $0.60/sq ft for Interior Lighting EnvelopeHVACLighting Notice & 2/3% Reduction Notice %20% Tax Deduction$0.60/sq ft

Oregon’s Business Energy Tax Credit (BETC) The BETC is an income tax credit and it reduces the taxpayer’s Oregon income tax liability dollar for dollar The BETC is a nonrefundable tax credit so the owners must have an Oregon tax liability to use the credit. However, the BETC can be sold (at a discount) to any Oregon Taxpayer. Depending on the type of project the credit is either 35% or 50% of eligible project costs. Credit must be taken over 5 years and any amount not used can be carried forward for 8 years. Many projects qualify for the BETC: ⁻Energy Efficiency Projects ⁻Renewable Energy Projects ⁻Sustainable Buildings

BETC – Sustainable Building Oregonians who build sustainable commercial buildings are eligible for the BETC. The incentive helps offset the cost of applying for the LEED™ rating and the extra design and commissioning costs. The sustainable building tax credit is based on 2 factors: – The square footage of the entire building – The rating the building receives - to be eligible for a tax credit, sustainable building facilities must achieve a minimum rating of "Silver.” Projects receiving a "Gold" or "Platinum" rating will be awarded proportionally larger tax credits The maximum BETC that can be claimed for sustainable building is $3.5 million (35% of the certified cost, up to a maximum certified cost of $10 million)

BETC - Energy Efficiency Projects Business owners and others who invest in energy conservation may be eligible for a state tax credit. Conservation projects include: – Insulation – HVAC – Heat recovery – Variable frequency drives (VFDs) – Controls – Irrigation – Other process changes that reduce energy use Retrofit Projects - To qualify for a tax credit, projects must be 10% more energy efficient than the existing installation (lighting retrofits must be 25% more efficient than existing lighting). New Construction – For new buildings, all measures must reduce energy use by at least 10% compared to a similar building that meets the minimum requirements of the state energy code.

Monetization of the BETC Pass-through option lets a project owner transfer a tax credit to a pass-through partner in return for a lump-sum cash payment upon completion of the project. Rates: Example a $100,000 project will have a $35,000 (35%) tax credit. A pass through partner (looking for a tax credit in that amount) will make a pass-through payment of $25,500 (25.5%) to the project owner. % Tax Credit1 yr rate (>$20,000) 5 yr rate (<$20,000) 35% %