Affordable Multifamily Housing Would Benefit Under New Energy Incentive Bill

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Tax Credit Advisor, November 2009: Three key U.S. senators have introduced a bill (S. 1637) to extend the existing federal new energy-efficient home tax credit and to provide an increased credit for low-income housing tax credit (LIHTC) properties.      

The bill was introduced by Sens. Olympia Snowe (R-Me.), Jeff Bingaman (D-N.M.), and Dianne Feinstein (D-Calif.). Snowe and Bingaman sit on the Senate Finance Committee, to which the bill was referred.

Under Section 45L of the federal tax code, a taxpayer may claim the energy-efficient home tax credit for an energy-efficient dwelling unit constructed or substantially rehabilitated during the year and sold or leased to another person. This also includes a manufactured home produced during the year. Dwelling units must satisfy specified energy-savings standards of 30% or 50% to qualify for the credit, which ranges in size from $1,000 to $2,000 and is generally claimed by taxpayers on IRS Form 8908.       

S. 1637 would extend the energy-efficient home tax credit through 2013, exempt it from the federal alternative minimum tax, and boost the size of the tax credit to $2,000 or $5,000 for dwelling units other than manufactured homes. The $2,000 credit would apply to units in qualified multifamily housing buildings.

The measure would also boost the credit size for units in new energy-efficient low-income housing tax credit (LIHTC) properties, or properties assisted with federal Section 1602 credit exchange funds, to $3,000 ($7,500 if meeting the higher energy savings standard). The bill would also preclude a basis reduction when the home energy credit and LIHTC are combined.     

In addition, S. 1637 would also increase the size of the existing federal commercial building energy efficiency tax deduction, which is available for qualified expenditures made through 2013. This deduction, currently equal to up to $1.80 per square foot of building floor area, is for the cost of qualified energy-efficiency improvements installed in commercial buildings. The deduction is restricted to the cost of improvements made pursuant to a plan to reduce by 50% the annual energy and power costs with respect to a building’s heating, cooling, hot water, and interior lighting systems. Qualifying are installed improvements to these systems or to the building’s envelope.

The bill would increase the maximum deduction amount from $1.80 to $3.00, and also authorize partial deductions for the costs of an energy-saving system or energy-saving systems that meet certain standards but don’t qualify for the regular deduction.      

Enterprise Community Partners, Inc. praised the new legislation. “The Expanding Building Energy Efficiency Incentives Act will bring real benefits to low-income families, who are particularly vulnerable to high utility costs, and provide replicable solutions through energy-efficiency development,” said Doris Koo, president and CEO.

In a related development, Sen. John Kerry (D-Mass.), joined by Sens. Barbara Boxer (D-Calif.) and Paul Kirk, Jr. (D-Mass.), introduced a sweeping climate change and energy bill (S. 1733) on September 30. One part of the measure would provide new funding for loans or grants to owners of federally subsidized housing projects for energy retrofits and green investments. In exchange for assistance, the affordability period of properties would have to be extended by at least 15 years.      

A House-passed bill (H.R. 2454) would also provide funding for energy retrofits and green investments in affordable housing properties. (For background, see Tax Credit Advisor, September 2009, p. 18.)

(To view bills: http://thomas.loc.gov)