The trend toward energy efficient building construction is saving on not only energy costs, but also on taxes for building owners and developers.
Gian Pazzia, a shareholder in tax credit specialist KBKG Inc., told an audience at the Accounting Today Growth & Profitability Summit in Orlando last week about the expanding array of tax incentives available for building green homes.
Fairly simple changes in lighting and construction materials can yield significant tax savings and, in some cases, they can even be carried back into prior years.
The tax credits can be quite lucrative. Section 45L, for example, offers developers of apartments, condominiums and single-family residences a $2,000 federal tax credit for each energy-efficient dwelling unit they construct after August 2005. A less stringent $1,000 tax credit is available for manufactured homes. However, there are some provisos.
The IRS requires that there be a certification, said Pazzia. There needs to be energy simulation modeling using IRS-approved software. The energy analysis also needs to be certified by a qualified third party.
The tax credits can reduce a building developers tax basis, but are not recaptured when the units are resold. The Small Business Jobs Act allows unused general business tax credits such as these to go against the AMT and they can be carried back five years. Thats huge, said Pazzia.
The credits could mean substantial tax savings for developers, which is all for the good of the planet, not to mention their bank accounts.