PRINTER'S NO. 71
No. 46 Session of 2007
INTRODUCED BY RUBLEY, FRANKEL, MANN, STEIL, ADOLPH, BASTIAN, BOYD, CALTAGIRONE, DePASQUALE, GEIST, HARHAI, HARPER, HENNESSEY, HERSHEY, HESS, KILLION, LEACH, MARSHALL, R. MILLER, MUNDY, PEIFER, PETRI, PETRONE, REICHLEY, ROSS, SAMUELSON, SANTONI, SCAVELLO, SCHRODER, SIPTROTH, STERN, STURLA, SURRA, TANGRETTI, VEREB, VITALI, WALKO, WATSON, YOUNGBLOOD, MELIO AND CLYMER, JANUARY 30, 2007
REFERRED TO COMMITTEE ON FINANCE, JANUARY 30, 2007
AN ACT 1 Amending the act of March 4, 1971 (P.L.6, No.2), entitled "An 2 act relating to tax reform and State taxation by codifying 3 and enumerating certain subjects of taxation and imposing 4 taxes thereon; providing procedures for the payment, 5 collection, administration and enforcement thereof; providing 6 for tax credits in certain cases; conferring powers and 7 imposing duties upon the Department of Revenue, certain 8 employers, fiduciaries, individuals, persons, corporations 9 and other entities; prescribing crimes, offenses and 10 penalties," providing for the High-Performance Buildings Tax 11 Credit. 12 The General Assembly of the Commonwealth of Pennsylvania 13 hereby enacts as follows: 14 Section 1. The act of March 4, 1971 (P.L.6, No.2), known as 15 the Tax Reform Code of 1971, is amended by adding an article to 16 read: 17 ARTICLE XIX-B 18 HIGH-PERFORMANCE BUILDINGS TAX CREDIT 19 Section 1901-B. Scope. 20 This article authorizes the High-Performance Buildings Tax
1 Credit. 2 Section 1902-B. Purpose. 3 The General Assembly declares the purposes of this article 4 are as follows: 5 (1) To promote better energy and environmental standards 6 for construction, rehabilitation and maintenance of buildings 7 in this Commonwealth. 8 (2) To optimize the energy performance of buildings 9 throughout this Commonwealth. 10 (3) To increase the demand for environmentally 11 preferable building materials, finishes and furnishings. 12 (4) To improve environmental quality in this 13 Commonwealth by decreasing the discharge of pollutants from 14 buildings and their manufacture. 15 (5) To create public awareness of new technologies that 16 can improve the health and productivity of building occupants 17 by meeting advanced criteria for indoor air quality. 18 (6) To improve working conditions and reduce related 19 health problems. 20 (7) To reduce this Commonwealth's dependence on imported 21 sources of energy through buildings that conserve energy and 22 utilize local and renewable energy sources. 23 (8) To protect and restore this Commonwealth's natural 24 resources by avoiding development of inappropriate building 25 sites. 26 (9) To reduce the burden on municipal water supply and 27 treatment by reducing potable water consumption. 28 (10) To reduce waste generation and to manage waste 29 through recycling and diversion from landfill disposal. 30 (11) To improve this Commonwealth's capacity to design, 20070H0046B0071 - 2 -
1 build and operate higher performance buildings, and in doing 2 so, to create new jobs and contribute to economic growth. 3 Section 1903-B. Definitions. 4 The following words and phrases when used in this article 5 shall have the meanings given to them in this section unless the 6 context clearly indicates otherwise: 7 "Achievement." Achievement and award of certification by a 8 high-performance green building standard as set forth in section 9 1904-B and adopted by regulation. 10 "Building project." The design, construction and renovation 11 of an inhabited physical structure and project building site. 12 "Commercial interior fit-out." Interior design and 13 installation by owners or tenants of new or existing space, 14 excluding structural components and core and shell elements. 15 "Credit allowance year." The later of: 16 (1) The taxable year during which the property, 17 construction, completion or rehabilitation referred to in 18 section 1905-B(a) has been placed in service or has received 19 a final certificate of occupancy. 20 (2) The first taxable year with respect to which the tax 21 credit may be claimed pursuant to the initial tax credit 22 component certificate issued pursuant to section 1908-B(a). 23 "Department." The Department of Revenue of the Commonwealth. 24 "Eligible building." A building located in this Commonwealth 25 that is any of the following: 26 (1) A residential multifamily building with at least 27 four habitable stories that contains at least 10,000 square 28 feet of interior space. 29 (2) One or more residential multifamily buildings with 30 at least four habitable stories that are part of a single or 20070H0046B0071 - 3 -
1 phased construction project that contains, in the aggregate, 2 at least 20,000 square feet of interior space, provided that 3 in any single phase of such project at least 10,000 square 4 feet of interior space is under construction or 5 rehabilitation. 6 (3) A building used for commercial or industrial 7 purposes of at least 10,000 gross square feet. 8 (4) Any combination of buildings described in paragraph 9 (1), (2) or (3) with at least 30,000 square feet of interior 10 space and a minimum of 10,000 square feet of interior space 11 per building. 12 "High-performance building." A building that is designed to 13 achieve integrated systems design and construction so as to 14 significantly reduce or eliminate the negative impact of the 15 built environment. 16 "Tax credit." The High-Performance Buildings Tax Credit 17 authorized under this article. 18 "Taxpayer." A business entity subject to tax under Article 19 III, IV, VI, VII, VIII, IX or XV. The term shall include the 20 shareholder of a Pennsylvania S corporation that receives a tax 21 credit under this article. 22 "Tiers." The level of achievement that must occur to 23 calculate the eligible amount of tax credit available. During 24 the first year of implementation of this article, the term means 25 three such levels as follows: 26 (1) Tier I: Achievement of the minimum level required 27 for certification plus one additional level. Tier I shall 28 also require the achievement of Environmental Protection 29 Agency Energy Star rating of at least 85 following the second 30 year of facility operation. 20070H0046B0071 - 4 -
1 (2) Tier II: Achievement of the minimum level required 2 for certification plus two additional levels. Tier II shall 3 also require achievement of Environmental Protection Agency 4 Energy Star rating of at least 90 following the second year 5 of facility operation. 6 (3) Tier III: Achievement of the minimum level required 7 for certification plus three additional levels. Tier III 8 shall also require achievement of Environmental Protection 9 Agency Energy Star rating of at least 95 following the second 10 year of facility operation. 11 The three tier levels shall remain in effect unless and until 12 modifications are made by the department, in consultation with 13 the Department of Environmental Protection, and necessitated by 14 the emergence of new or changes to existing high-performance 15 building standards as defined under sections 1904-B and 1905-B. 16 Section 1904-B. Standards. 17 The high-performance building standards applicable to this 18 article shall meet all of the following minimum criteria: 19 (1) Be consensus-based, as defined by the Office of 20 Management and Budget, Circular No. A-119, dated February 10, 21 1998. 22 (2) At a minimum, include performance-based categories 23 or tax credits that will foster achievement of items under 24 section 1902-B(2), (3), (4), (6), (7), (8), (9) and (10). 25 (3) Require documentation, verifiable calculations or 26 the equivalent procedure to substantiate and support any 27 claims made under this article. 28 (4) Employ third-party, postconstruction review and 29 verification for achievement of certification. 30 (5) Have a track record of certified green buildings in 20070H0046B0071 - 5 -
1 the United States. 2 Section 1905-B. Eligibility. 3 (a) Projects.--All projects shall meet or exceed a 4 prescribed level of achievement under the adopted high- 5 performance building standard as set forth in section 1904-B. 6 (b) Level of achievement.--The level of achievement to be 7 met under subsection (a) shall be the tier levels. 8 Section 1906-B. High-Performance Building Tax Credit. 9 (a) Eligible taxpayers and buildings.--The High-Performance 10 Building Tax Credit shall be available to a taxpayer, whether 11 owner or tenant, for either the construction of a high- 12 performance building or the rehabilitation of a building which 13 is not a high-performance building into a high-performance 14 building. 15 (b) Application.--A taxpayer may apply for a tax credit 16 against any tax imposed under Article III, IV, VI, VII, VIII, IX 17 or XV. The amount of the credit shall be as specified in section 18 1907-B. The amount of each credit shall not exceed the limit set 19 forth in the initial credit certificate obtained pursuant to 20 section 1908-B(a). In the determination of the tax credit, no 21 cost paid or incurred by the taxpayer shall be the basis for 22 more than one tax credit. 23 (c) Requirements.--The tax credit may not be allowed for any 24 taxable year unless all of the following are met: 25 (1) The taxpayer has obtained and filed both an initial 26 credit certificate and high-performance documentation issued 27 pursuant to section 1908-B. 28 (2) A certificate of occupancy for the building has been 29 issued. 30 (3) The property for which the credit is claimed is in 20070H0046B0071 - 6 -
1 service during the taxable year. 2 (d) Timing.--The credit amount allowed for the high- 3 performance building shall be claimed for the credit allowance 4 year and for each of the three taxable years succeeding the 5 credit allowance year. The total tax credit allowed in the 6 aggregate may not exceed the maximum set forth in the initial 7 tax credit certificate issued under section 1908-B(a). 8 (e) Credit to successor owner.--If a credit is allowed to a 9 building owner pursuant to this article with respect to property 10 and the property, or an interest therein, is sold, the tax 11 credit for the period after the sale which would have been 12 allowable to the prior owner had the property not been sold 13 shall be allowable to the new owner. The tax credit for the year 14 of sale shall be allocated between the parties on the basis of 15 the number of days during such year that the property or 16 interest was held by each. 17 (f) Credit to successor tenant.--If a tax credit is allowed 18 to a tenant pursuant to this article with respect to property 19 and if the tenancy is terminated but the property continues to 20 be used in the building by a successor tenant, the tax credit 21 for the period after termination which would have been allowable 22 to the prior tenant had the tenancy not been terminated shall be 23 allowable to the successor tenant. The tax credit for the year 24 of termination shall be allocated between the parties on the 25 basis of the number of days during such year that the property 26 was used by each. 27 Section 1907-B. Tax credit amount. 28 (a) General rule.--The total tax credit that is available to 29 a taxpayer for a single eligible project shall be distributed in 30 four equal amounts over each of the four years specified in 20070H0046B0071 - 7 -
1 section 1906-B(d). This total amount shall be based on the 2 number of gross square feet of floor space in the eligible 3 building, that building's achievement of an appropriate standard 4 and the tier of achievement earned. In addition, no building may 5 receive a tax credit unless it has earned achievement at or 6 above the Tier I level. All such approved projects shall receive 7 a base tax credit of $35,000. 8 (b) Additional tax credit.--An additional tax credit shall 9 be given cumulatively based on the following formula: 10 (1) For buildings achieving Tier I: 11 (i) For the first 10,000 gross square feet, $1.50 of 12 tax credit per square foot. 13 (ii) For up to the next 40,000 gross square feet, an 14 additional $.75 of tax credit per square foot. 15 (iii) For the next 50,000 gross square feet or 16 greater, an additional $.50 of tax credit per square 17 foot. 18 (2) For achieving Tier II: 19 (i) For the first 10,000 gross square feet, $2.50 of 20 tax credit per square foot. 21 (ii) For up to the next 40,000 gross square feet, an 22 additional $1 of tax credit per square foot. 23 (iii) For the next 50,000 gross square feet or 24 greater, an additional $.75 of tax credit per square 25 foot. 26 (3) For achieving Tier III: 27 (i) For the first 10,000 gross square feet, $3.50 of 28 tax credit per square foot. 29 (ii) For the next 40,000 gross square feet, an 30 additional $1.50 of tax credit per square foot. 20070H0046B0071 - 8 -
1 (iii) For the next 50,000 gross square feet or 2 greater, an additional $1.25 of tax credit per square 3 foot. 4 Section 1908-B. Certifications. 5 (a) Initial tax credit certificate.-- 6 (1) The department shall issue an initial tax credit 7 certificate to a taxpayer that has applied for one where the 8 taxpayer has made a showing that the taxpayer will place in 9 service within a reasonable period of time a property which 10 would warrant the allowance of a tax credit under this 11 article. 12 (2) The initial tax credit certificate shall state the 13 first taxable year for which the tax credit may be claimed 14 and its expiration date and shall apply only to property 15 placed in service by the expiration date. The expiration date 16 may be extended at the discretion of the department in order 17 to avoid unwarranted hardship. 18 (3) The initial tax credit certificate shall state the 19 maximum amount of the total tax credit allowable. This total 20 tax credit shall be distributed in four equal amounts over 21 the four taxable years for which the tax credit is allowed 22 under section 1906-B. Initial credit certificates shall not 23 be issued, in the aggregate, for more than $32,000,000 of tax 24 credits. In addition, the certificates shall be limited in 25 their applicability, as follows: 26 Total credits shall not With respect to taxable 27 be allowed for more than: years beginning in: 28 $4,000,000 2007 29 $6,000,000 2008 30 $8,000,000 2009 20070H0046B0071 - 9 -
1 $6,000,000 2010 2 $4,000,000 2011 3 $2,000,000 2012 4 (b) Program extension.--If in the aggregate the total amount 5 of tax credits to be issued is not exceeded, the department may 6 extend the program beyond the initial schedule listed in 7 subsection (a) and shall publish the extension as a notice in 8 the Pennsylvania Bulletin. 9 (c) High-performance documentation.--For each taxable year 10 subsequent to the first year for which a taxpayer claims a tax 11 credit, the taxpayer shall provide annual performance 12 documentation to the department and the Department of 13 Environmental Protection resulting from the following required 14 activities: development and implementation of a Measurement and 15 Verification Plan consistent with Option D: Calibrated 16 Simulation (Savings Estimation Method 2), or Option B: Energy 17 Conservation Measure Isolation, as specified in the 18 International Performance Measurement and Verification Protocol 19 Volume III: Concepts and Options for Determining Energy Savings 20 in New Construction, April 2003. This high-performance 21 documentation shall set forth the specific findings upon which 22 the certificate is based. 23 (d) Filing.--The taxpayer shall file the high-performance 24 documentation and the associated initial tax credit certificate 25 with the application for the tax credit. 26 (e) Information.--The high-performance documentation shall 27 include sufficient information to identify each building and 28 such other information as the Department of Environmental 29 Protection may require. Except for the first year for which the 30 tax credit is sought, such information shall include: 20070H0046B0071 - 10 -
1 (1) Annual energy consumption for the building in terms 2 of British Thermal Units per square foot per year as well as 3 costs per square foot per year for energy consumption by fuel 4 type, performed in accordance with the standards set forth in 5 sections 1904-B and 1905-B. 6 (2) Annual results of indoor air monitoring, if any, 7 performed in accordance with the standards set forth in 8 sections 1904-B and 1905-B. 9 (3) Confirmation that the building continues to meet 10 requirements regarding smoking areas, if provided, in 11 accordance with the standards specified in sections 1904-B 12 and 1905-B. 13 Section 1909-B. Regulations. 14 The department, in consultation with the Department of 15 Environmental Protection, shall promulgate such regulations as 16 may be necessary for the implementation and administration of 17 this article. The regulations shall include, but not be limited 18 to: 19 (1) The adoption of high-performance building standards 20 selected by the department from among accepted industry 21 standards meeting the criteria prescribed in section 1906-B. 22 (2) Procedures and methods for verifying compliance with 23 the adopted standards in the design and construction of 24 eligible building projects under this article. 25 These regulations will be promulgated in accordance with the act 26 of June 25, 1982 (P.L.633, No.181), known as the Regulatory 27 Review Act and section 1920-A of the act of April 9, 1929 28 (P.L.177, No.175), known as The Administrative Code of 1929. 29 Section 1910-B. Report. 30 The department shall annually make a report to the 20070H0046B0071 - 11 -
1 Environmental Resources and Energy Committee of the Senate and 2 the Environmental Resources and Energy Committee of the House of 3 Representatives on the activities undertaken pursuant to this 4 article, including, but not limited to: 5 (1) The total amount of tax credits provided. 6 (2) The amount of tax credits provided by building type. 7 (3) The levels of high-performance building 8 certifications achieved. 9 (4) A description of any changes made to the levels of 10 approved levels of achievement. 11 (5) Other information necessary to provide a complete 12 understanding of the operation of and benefits from this 13 article. 14 Section 2. This act shall take effect as follows: 15 (1) The addition of sections 1901-B, 1902-B, 1903-B, 16 1904-B and 1910-B of the act shall take effect in 30 days. 17 (2) This section shall take effect immediately. 18 (3) The remainder of this act shall take effect in 12 19 months. L6L72DMS/20070H0046B0071 - 12 -