1Amending the act of March 4, 1971 (P.L.6, No.2), entitled "An
2act relating to tax reform and State taxation by codifying
3and enumerating certain subjects of taxation and imposing
4taxes thereon; providing procedures for the payment,
5collection, administration and enforcement thereof; providing
6for tax credits in certain cases; conferring powers and
7imposing duties upon the Department of Revenue, certain
8employers, fiduciaries, individuals, persons, corporations
9and other entities; prescribing crimes, offenses and
10penalties," providing for the High-Performance Buildings Tax
11Credit.

12The General Assembly of the Commonwealth of Pennsylvania
13hereby enacts as follows:

14Section 1. The act of March 4, 1971 (P.L.6, No.2), known as
15the Tax Reform Code of 1971, is amended by adding an article to
16read:

17ARTICLE XIX-B

18HIGH-PERFORMANCE BUILDINGS TAX CREDIT

19Section 1901-B. Scope.

20This article authorizes the High-Performance Buildings Tax
21Credit.

1Section 1902-B. Purpose.

2The General Assembly declares the purposes of this article
3are as follows:

4(1) To promote better energy and environmental standards
5for construction, rehabilitation and maintenance of buildings
6in this Commonwealth.

7(2) To optimize the energy performance of buildings
8throughout this Commonwealth.

9(3) To increase the demand for environmentally
10preferable building materials, finishes and furnishings.

11(4) To improve environmental quality in this
12Commonwealth by decreasing the discharge of pollutants from
13buildings and their manufacture.

14(5) To create public awareness of new technologies that
15can improve the health and productivity of building occupants
16by meeting advanced criteria for indoor air quality.

17(6) To improve working conditions and reduce related
18health problems.

19(7) To reduce this Commonwealth's dependence on imported
20sources of energy through buildings that conserve energy and
21utilize local and renewable energy sources.

22(8) To protect and restore this Commonwealth's natural
23resources by avoiding development of inappropriate building
24sites.

25(9) To reduce the burden on municipal water supply and
26treatment by reducing potable water consumption.

27(10) To reduce waste generation and to manage waste
28through recycling and diversion from landfill disposal.

29(11) To improve this Commonwealth's capacity to design,
30build and operate higher performance buildings, and in doing

1so, to create new jobs and contribute to economic growth.

2Section 1903-B. Definitions.

3The following words and phrases when used in this article
4shall have the meanings given to them in this section unless the
5context clearly indicates otherwise:

6"Achievement." Achievement and award of certification by a
7high-performance green building standard as set forth in section
81904-B and adopted by regulation.

9"Building project." The design, construction and renovation
10of an inhabited physical structure and project building site.

11"Commercial interior fit-out." Interior design and
12installation by owners or tenants of new or existing space,
13excluding structural components and core and shell elements.

14"Credit allowance year." The later of:

15(1) The taxable year during which the property,
16construction, completion or rehabilitation referred to in
17section 1905-B(a) has been placed in service or has received
18a final certificate of occupancy.

19(2) The first taxable year with respect to which the tax
20credit may be claimed pursuant to the initial tax credit
21component certificate issued pursuant to section 1908-B(a).

22"Department." The Department of Revenue of the Commonwealth.

23"Eligible building." A building located in this Commonwealth
24that is any of the following:

25(1) A residential multifamily building with at least
26four habitable stories that contains at least 10,000 square
27feet of interior space.

28(2) One or more residential multifamily buildings with
29at least four habitable stories that are part of a single or
30phased construction project that contains, in the aggregate,

1at least 20,000 square feet of interior space, provided that
2in any single phase of a project at least 10,000 square feet
3of interior space is under construction or rehabilitation.

4(3) A building used for commercial or industrial
5purposes of at least 10,000 gross square feet.

6(4) Any combination of buildings described in paragraph
7(1), (2) or (3) with at least 30,000 square feet of interior
8space and a minimum of 10,000 square feet of interior space
9per building.

10"High-performance building." A building that is designed to
11achieve integrated systems design and construction so as to
12significantly reduce or eliminate the negative impact of the
13built environment.

14"LEED." The Leadership in Energy and Environmental Design
15Green Building Rating System developed by the U.S. Green
16Building Council.

17"LEED NC." LEED's rating system for New Construction and
18Major Renovations.

19"Tax credit." The High-Performance Buildings Tax Credit
20authorized under this article.

21"Taxpayer." A business entity subject to tax under Article
22III, IV, VI, VII, VIII, IX or XV. The term shall include the
23shareholder of a Pennsylvania S corporation that receives a tax
24credit under this article.

25"Tiers." The level of achievement that must occur to
26calculate the eligible amount of tax credit available. During
27the first year of implementation of this article, the term means
28three levels as follows:

29(1) Tier I: Achievement of the minimum level required
30for certification plus one additional level. Tier I shall

1also require the achievement of Environmental Protection
2Agency Energy Star rating of at least 85 following the second
3year of facility operation.

4(2) Tier II: Achievement of the minimum level required
5for certification plus two additional levels. Tier II shall
6also require achievement of Environmental Protection Agency
7Energy Star rating of at least 90 following the second year
8of facility operation.

9(3) Tier III: Achievement of the minimum level required
10for certification plus three additional levels. Tier III
11shall also require achievement of Environmental Protection
12Agency Energy Star rating of at least 95 following the second
13year of facility operation.

14The three tier levels shall remain in effect unless and until
15modifications are made by the department, in consultation with
16the Department of Environmental Protection, and necessitated by
17the emergence of new or changes to existing high-performance
18building standards as defined under sections 1904-B and 1905-B.

19Section 1904-B. Standards.

20The high-performance building standards applicable to this
21article shall meet all of the following minimum criteria:

22(1) Be consensus-based, as defined by the Office of
23Management and Budget, Circular No. A-119, dated February 10,
241998.

25(2) At a minimum, include performance-based categories
26or tax credits that will foster achievement of items under
27section 1902-B(2), (3), (4), (6), (7), (8), (9) and (10).

28(3) Require documentation, verifiable calculations or
29the equivalent procedure to substantiate and support any
30claims made under this article.

1(4) Employ third-party, postconstruction review and
2verification for achievement of certification.

3(5) Have a track record of certified green buildings in
4the United States.

5(6) Comply with LEED NC guidelines for green building
6certification.

7Section 1905-B. Eligibility.

8(a) Projects.--All projects shall meet or exceed a
9prescribed level of achievement under the adopted high-
10performance building standard as set forth in section 1904-B.

11(b) Level of achievement.--The level of achievement to be
12met under subsection (a) shall be the tier levels.

13Section 1906-B. High-Performance Building Tax Credit.

14(a) Eligible taxpayers and buildings.--The High-Performance
15Building Tax Credit shall be available to a taxpayer, whether
16owner or tenant, for either the construction of a high-
17performance building or the rehabilitation of a building which
18is not a high-performance building into a high-performance
19building.

20(b) Application.--A taxpayer may apply for a tax credit
21against any tax imposed under Article III, IV, VI, VII, VIII, IX
22or XV. The amount of the credit shall be as specified in section
231907-B. The amount of each credit shall not exceed the limit set
24forth in the initial credit certificate obtained pursuant to
25section 1908-B(a). In the determination of the tax credit, no
26cost paid or incurred by the taxpayer shall be the basis for
27more than one tax credit.

28(c) Requirements.--The tax credit may not be allowed for any
29taxable year unless all of the following are met:

30(1) The taxpayer has obtained and filed both an initial

1credit certificate and high-performance documentation issued
2pursuant to section 1908-B.

3(2) A certificate of occupancy for the building has been
4issued.

5(3) The property for which the credit is claimed is in
6service during the taxable year.

7(d) Timing.--The credit amount allowed for the high-
8performance building shall be claimed for the credit allowance
9year and for each of the three taxable years succeeding the
10credit allowance year. The total tax credit allowed in the
11aggregate may not exceed the maximum set forth in the initial
12tax credit certificate issued under section 1908-B(a).

13(e) Credit to successor owner.--If a credit is allowed to a
14building owner pursuant to this article with respect to property
15and the property, or an interest therein, is sold, the tax
16credit for the period after the sale which would have been
17allowable to the prior owner had the property not been sold
18shall be allowable to the new owner. The tax credit for the year
19of sale shall be allocated between the parties on the basis of
20the number of days during the year that the property or interest
21was held by each.

22(f) Credit to successor tenant.--If a tax credit is allowed
23to a tenant pursuant to this article with respect to property
24and if the tenancy is terminated but the property continues to
25be used in the building by a successor tenant, the tax credit
26for the period after termination which would have been allowable
27to the prior tenant had the tenancy not been terminated shall be
28allowable to the successor tenant. The tax credit for the year
29of termination shall be allocated between the parties on the
30basis of the number of days during the year that the property

1was used by each.

2Section 1907-B. Tax credit amount.

3(a) General rule.--The total tax credit that is available to
4a taxpayer for a single eligible project shall be distributed in
5four equal amounts over each of the four years specified in
6section 1906-B(d). This total amount shall be based on the
7number of gross square feet of floor space in the eligible
8building, that building's achievement of an appropriate standard
9and the tier of achievement earned. In addition, no building may
10receive a tax credit unless it has earned achievement at or
11above the Tier I level. All the approved projects shall receive
12a base tax credit of $35,000.

13(b) Additional tax credit.--An additional tax credit shall
14be given cumulatively based on the following formula:

15(1) For buildings achieving Tier I:

16(i) For the first 10,000 gross square feet, $1.50 of
17tax credit per square foot.

18(ii) For up to the next 40,000 gross square feet, an
19additional $.75 of tax credit per square foot.

20(iii) For the next 50,000 gross square feet or
21greater, an additional $.50 of tax credit per square
22foot.

23(2) For achieving Tier II:

24(i) For the first 10,000 gross square feet, $2.50 of
25tax credit per square foot.

26(ii) For up to the next 40,000 gross square feet, an
27additional $1 of tax credit per square foot.

28(iii) For the next 50,000 gross square feet or
29greater, an additional $.75 of tax credit per square
30foot.

1(3) For achieving Tier III:

2(i) For the first 10,000 gross square feet, $3.50 of
3tax credit per square foot.

4(ii) For the next 40,000 gross square feet, an
5additional $1.50 of tax credit per square foot.

6(iii) For the next 50,000 gross square feet or
7greater, an additional $1.25 of tax credit per square
8foot.

9(c) Availability of tax credits.--Each fiscal year,
10$10,000,000 in tax credits shall be made available to the
11department and may be awarded by the department in accordance
12with this article.

13Section 1908-B. Certifications.

14(a) Initial tax credit certificate.--

15(1) The department shall issue an initial tax credit
16certificate to a taxpayer that has applied for one where the
17taxpayer has made a showing that the taxpayer will place in
18service within a reasonable period of time a property which
19would warrant the allowance of a tax credit under this
20article.

21(2) The initial tax credit certificate shall state the
22first taxable year for which the tax credit may be claimed
23and its expiration date and shall apply only to property
24placed in service by the expiration date. The expiration date
25may be extended at the discretion of the department in order
26to avoid unwarranted hardship.

27(3) The initial tax credit certificate shall state the
28maximum amount of the total tax credit allowable. This total
29tax credit shall be distributed in four equal amounts over
30the four taxable years for which the tax credit is allowed

1under section 1906-B. Initial credit certificates shall not
2be issued, in the aggregate, for more than $32,000,000 of tax
3credits. In addition, the certificates shall be limited in
4their applicability, as follows:

5Total credits shall not	With respect to taxable
6be allowed for more than:	years beginning in:
7$4,000,000	2013
8$8,000,000	2014
9$8,000,000	2015
10$6,000,000	2016
11$4,000,000	2017
12$2,000,000	2018

13(b) Program extension.--If in the aggregate the total amount
14of tax credits to be issued is not exceeded, the department may
15extend the program beyond the initial schedule listed in
16subsection (a) and shall publish the extension as a notice in
17the Pennsylvania Bulletin.

18(c) High-performance documentation.--For each taxable year
19subsequent to the first year for which a taxpayer claims a tax
20credit, the taxpayer shall provide annual performance
21documentation to the department and the Department of
22Environmental Protection resulting from the following required
23activities: development and implementation of a Measurement and
24Verification Plan consistent with Option D: Calibrated
25Simulation (Savings Estimation Method 2), or Option B: Energy
26Conservation Measure Isolation, as specified in the
27International Performance Measurement and Verification Protocol
28Volume III: Concepts and Options for Determining Energy Savings
29in New Construction, April 2003. This high-performance
30documentation shall set forth the specific findings upon which

1the certificate is based.

2(d) Filing.--The taxpayer shall file the high-performance
3documentation and the associated initial tax credit certificate
4with the application for the tax credit.

5(e) Information.--The high-performance documentation shall
6include sufficient information to identify each building and
7other information as the Department of Environmental Protection
8may require. Except for the first year for which the tax credit
9is sought, the information shall include:

10(1) Annual energy consumption for the building in terms
11of British Thermal Units per square foot per year as well as
12costs per square foot per year for energy consumption by fuel
13type, performed in accordance with the standards set forth in
14sections 1904-B and 1905-B.

15(2) Annual results of indoor air monitoring, if any,
16performed in accordance with the standards set forth in
17sections 1904-B and 1905-B.

18(3) Confirmation that the building continues to meet
19requirements regarding smoking areas, if provided, in
20accordance with the standards specified in sections 1904-B
21and 1905-B.

22Section 1909-B. Regulations.

23The department, in consultation with the Department of
24Environmental Protection, shall promulgate regulations as may be
25necessary for the implementation and administration of this
26article. The regulations shall include, but not be limited to:

27(1) The adoption of high-performance building standards
28selected by the department from among accepted industry
29standards meeting the criteria prescribed in section 1906-B.

30(2) Procedures and methods for verifying compliance with

1the adopted standards in the design and construction of
2eligible building projects under this article.

3These regulations will be promulgated in accordance with the 
4act of June 25, 1982 (P.L.633, No.181), known as the Regulatory 
5Review Act and section 1920-A of the act of April 9, 1929 (P.L.

6177, No.175), known as The Administrative Code of 1929.

7Section 1910-B. Report.

8The department shall annually make a report to the
9Environmental Resources and Energy Committee of the Senate and
10the Environmental Resources and Energy Committee of the House of
11Representatives on the activities undertaken pursuant to this
12article, including, but not limited to:

13(1) The total amount of tax credits provided.

14(2) The amount of tax credits provided by building type.

15(3) The levels of high-performance building
16certifications achieved.

17(4) A description of any changes made to the levels of
18approved levels of achievement.

19(5) Other information necessary to provide a complete
20understanding of the operation of and benefits from this
21article.

22Section 2. This act shall take effect as follows:

23(1) The addition of sections 1901-B, 1902-B, 1903-B,
241904-B and 1910-B of the act shall take effect in 30 days.

25(2) This section shall take effect immediately.

26(3) The remainder of this act shall take effect in 12
27months.