Page 16
— Multifamily Properties Quarterly — August 2016
T
here currently are two poten-
tial ways to obtain tax sav-
ings through energy efficien-
cy – during the design and
construction of multifamily
and commercial developments and
government-facility improvements.
These include maximizing the ben-
efits available through the Internal
Revenue Code Section 45L New
Energy Efficient Home Credit and
Internal Revenue Code 179D Energy
Efficient Commercial Buildings
Deduction.
New Energy Efficient Home Credit
The Energy Efficient Home Credit
(45L) provides a tax credit of $2,000
per qualifying dwelling unit. Devel-
opers and investors of apartments,
senior living facilities, student
housing, affordable housing, mixed-
used developments and condomini-
um developments may apply for the
credit.
For a dwelling unit to qualify for
the credit, the heating and cooling
energy consumption per unit must
be a minimum of 50 percent less
than a baseline building designed,
according to the 2006 International
Energy Conservation Code, and the
building envelope must provide a
level of heating and cooling that is
a minimum of 10 percent less than
the baseline unit. The building must
be three stories or less in height
above grade, with the first units
being leased after Jan. 1, 2011.
There are a number of new build-
ing design improvements that may
allow units to qualify. They include
the following:
• Energy Star
appliances.
• Air-conditioning
units with a mini-
mum SEER of 13.
• Minimum wall
insulation of R-21.
• Heater efficien-
cy greater than 90
percent.
• Heat pump sys-
tems or hydronic
heat systems.
• Window glaz-
ing that provides
a solar heat gain
coefficient and
U-factor of 0.3 or less.
• Building wrap over exterior wall
sheathing.
• High-absorbent exterior paint.
• Cool roof designs.
Not all improvements are
required, but a well-designed com-
bination may provide added tax
benefits without adversely impact-
ing the overall building costs.
The 45L tax credit will be recorded
as a general business credit on
the tax return. Tax returns can be
amended retroactively to claim
the credit in open tax years. The
tax credit is not refundable and
not subject to recapture rules. The
credit does not reduce alternative
minimum tax, provides a carryfor-
ward of 20 years and a carryback of
one year.
Energy-Efficient
Commercial Buildings
For multifamily residences greater
than three stories above grade, the
Energy Efficient Commercial Build-
ings Tax Deduction (179D) is an
incentive provided by the federal
government, which allows a deduc-
tion of up to $1.80 per square foot
for the implementation of energy-
efficient improvements or new
construction. The building owner
or lessees of privately owned build-
ings and the designer (architect,
engineer, contractor, energy services
provider) of government buildings
may qualify to receive the deduc-
tion. The deduction can be used on
new construction, renovations or
additions to commercial and gov-
ernment buildings as well as multi-
family developments four stories or
higher.
A third-party licensed engineer or
contractor must certify the build-
ing’s energy cost reduction through
a site inspection. The building’s
interior lighting, HVAC, domestic
hot water and envelope systems
are modeled using Department of
Energy-approved software, includ-
ing DOE 2.2, Trace 700, eQuest and
EnergyPlus. The new building con-
struction is compared to a baseline
building following ASHRAE 90.1-
2001 standards. Construction placed
in service in 2016 will go under
ASHRAE 90.1-2007 standards.
If the modeling results show a
reduction of 50 percent or more as
compared to the baseline building,
the building is defined as a fully
qualifying property and the owner,
lessee or designer receives a deduc-
tion of $1.80 per sf. If the results
show a reduction of between 10 and
50 percent, the building is deemed
partially qualifying property and
a partial deduction of 60 cents per
sf for each qualifying system is
awarded.
For example, in order for build-
ings constructed between 2012 and
2016 to qualify for a partial deduc-
tion, one of the following must be
met:
• The building’s interior lighting
system must decrease overall ener-
gy costs by 25 percent;
• The HVAC and domestic hot
water systems must decrease the
overall energy costs by 15 percent;
or
• The building envelope system
must decrease overall energy costs
by 10 percent.
Tax savings through energy-effi-
ciency incentives is a proven way
to help offset development costs,
while providing a higher-quality liv-
ing environment with lower utility
costs for property managers and
residents of all types of multifamily
housing.
These tax incentives through
energy-efficient design and con-
struction are a valuable benefit for
owners, developers and designers
of high-performance buildings that
should be considered for new prop-
erties or existing properties that
have significant energy-efficient
improvements completed on them.
For multifamily properties con-
sisting of three stories or less, the
45L tax credit provides a $2,000
credit per unit that qualifies. For
developments greater than three
stories, the 179D tax deduction can
provide an owner or designer up to
$1.80 per sf of building.
s
Mike Gutesha,
CPA
Principal,
CliftonLarsonAllen
LLP, Greenwood
Village
Taxes
Catamount knows that understanding the
specialized requirements of multifamily
construction is vital to success in this
market. Our team members have the
expertise and dedication to meet your
project’s unique needs.
For nearly 20 years, customers nationwide
have put their trust in Catamount. We’re
excited to be a resource for the multifamily
market and to do what it takes to make
your project a success. That’s the
Catamount way.
CONTACT CATAMOUNT FOR YOUR
NEXT MULTIFAMILY PROJECT
WE’RE EXPERTS AT DELIVERING ON COMPLEX
REQUIREMENTS, SO YOU CAN FOCUS ON BUILDING
YOUR BUSINESS.
OVER THE PAST FIVE
YEARS, CATAMOUNT HAS:
›
Been awarded 57 multifamily
projects nationwide
›
Completed 4,823 units
valued at $501 million
›
838 units currently under
construction in Colorado,
Ohio and Texas
SPECIALIZING IN:
›
Affordable Housing
›
Assisted Living
›
Market-Rate Apartments
›
Mid-Rise Construction
›
Mixed-Use Development
›
Senior Living
›
Student Housing
›
Urban Infill
