PRINTER'S NO. 1747
No. 1205 Session of 2007
INTRODUCED BY M. SMITH, BENNINGTON, BOYD, BRENNAN, CALTAGIRONE, DePASQUALE, DeWEESE, EACHUS, FRANKEL, FREEMAN, GALLOWAY, GEORGE, GIBBONS, GRUCELA, HARHAI, HARPER, HENNESSEY, JOSEPHS, KING, LEACH, MAHONEY, MANN, MARKOSEK, McCALL, McGEEHAN, MUSTIO, M. O'BRIEN, PALLONE, PETRONE, PRESTON, PYLE, READSHAW, SANTONI, SCAVELLO, SIPTROTH, SOLOBAY, STURLA, SURRA, THOMAS, VITALI, WALKO, J. WHITE, YOUNGBLOOD, MARSHALL, MAHER, MANDERINO, SCHRODER, SHAPIRO, KOTIK, WANSACZ AND GERGELY, MAY 31, 2007
REFERRED TO COMMITTEE ON ENVIRONMENTAL RESOURCES AND ENERGY, MAY 31, 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
1 Section 1901-B. Scope. 2 This article authorizes the High-Performance Buildings Tax 3 Credit. 4 Section 1902-B. Purpose. 5 The General Assembly declares the purposes of this article 6 are as follows: 7 (1) To promote better energy and environmental standards 8 for construction, rehabilitation and maintenance of buildings 9 in this Commonwealth. 10 (2) To optimize the energy performance of buildings 11 throughout this Commonwealth. 12 (3) To increase the demand for environmentally 13 preferable building materials, finishes and furnishings. 14 (4) To improve environmental quality in this 15 Commonwealth by decreasing the discharge of pollutants from 16 buildings and their manufacture. 17 (5) To create public awareness of new technologies that 18 can improve the health and productivity of building occupants 19 by meeting advanced criteria for indoor air quality. 20 (6) To improve working conditions and reduce related 21 health problems. 22 (7) To reduce this Commonwealth's dependence on imported 23 sources of energy through buildings that conserve energy and 24 utilize local and renewable energy sources. 25 (8) To protect and restore this Commonwealth's natural 26 resources by avoiding development of inappropriate building 27 sites. 28 (9) To reduce the burden on municipal water supply and 29 treatment by reducing potable water consumption. 30 (10) To reduce waste generation and to manage waste 20070H1205B1747 - 2 -
1 through recycling and diversion from landfill disposal. 2 (11) To improve this Commonwealth's capacity to design, 3 build and operate higher performance buildings, and in doing 4 so, to create new jobs and contribute to economic growth. 5 Section 1903-B. Definitions. 6 The following words and phrases when used in this article 7 shall have the meanings given to them in this section unless the 8 context clearly indicates otherwise: 9 "Achievement." Achievement and award of certification by a 10 high-performance green building standard as set forth in section 11 1904-B and adopted by regulation. 12 "Building project." The design, construction and renovation 13 of an inhabited physical structure and project building site. 14 "Commercial interior fit-out." Interior design and 15 installation by owners or tenants of new or existing space, 16 excluding structural components and core and shell elements. 17 "Credit allowance year." The later of: 18 (1) The taxable year during which the property, 19 construction, completion or rehabilitation referred to in 20 section 1905-B(a) has been placed in service or has received 21 a final certificate of occupancy. 22 (2) The first taxable year with respect to which the tax 23 credit may be claimed pursuant to the initial tax credit 24 component certificate issued pursuant to section 1908-B(a). 25 "Department." The Department of Revenue of the Commonwealth. 26 "Eligible building." A building located in this Commonwealth 27 that is any of the following: 28 (1) A residential multifamily building with at least 29 four habitable stories that contains at least 10,000 square 30 feet of interior space. 20070H1205B1747 - 3 -
1 (2) One or more residential multifamily buildings with 2 at least four habitable stories that are part of a single or 3 phased construction project that contains, in the aggregate, 4 at least 20,000 square feet of interior space, provided that 5 in any single phase of such project at least 10,000 square 6 feet of interior space is under construction or 7 rehabilitation. 8 (3) A building used for commercial or industrial 9 purposes of at least 10,000 gross square feet. 10 (4) Any combination of buildings described in paragraph 11 (1), (2) or (3) with at least 30,000 square feet of interior 12 space and a minimum of 10,000 square feet of interior space 13 per building. 14 "High-performance building." A building that is designed to 15 achieve integrated systems design and construction so as to 16 significantly reduce or eliminate the negative impact of the 17 built environment. 18 "LEED." The Leadership in Energy and Environmental Design 19 Green Building Rating System developed by the U.S. Green 20 Building Council. 21 "LEED-NC." LEED's rating system for New Construction and 22 Major Renovations. 23 "Tax credit." The High-Performance Buildings Tax Credit 24 authorized under this article. 25 "Taxpayer." A business entity subject to tax under Article 26 III, IV, VI, VII, VIII, IX or XV. The term shall include the 27 shareholder of a Pennsylvania S corporation that receives a tax 28 credit under this article. 29 "Tiers." The level of achievement that must occur to 30 calculate the eligible amount of tax credit available. During 20070H1205B1747 - 4 -
1 the first year of implementation of this article, the term means 2 three such levels as follows: 3 (1) Tier I: Achievement of the minimum level required 4 for certification plus one additional level. Tier I shall 5 also require the achievement of Environmental Protection 6 Agency Energy Star rating of at least 85 following the second 7 year of facility operation. 8 (2) Tier II: Achievement of the minimum level required 9 for certification plus two additional levels. Tier II shall 10 also require achievement of Environmental Protection Agency 11 Energy Star rating of at least 90 following the second year 12 of facility operation. 13 (3) Tier III: Achievement of the minimum level required 14 for certification plus three additional levels. Tier III 15 shall also require achievement of Environmental Protection 16 Agency Energy Star rating of at least 95 following the second 17 year of facility operation. 18 The three tier levels shall remain in effect unless and until 19 modifications are made by the department, in consultation with 20 the Department of Environmental Protection, and necessitated by 21 the emergence of new or changes to existing high-performance 22 building standards as defined under sections 1904-B and 1905-B. 23 Section 1904-B. Standards. 24 The high-performance building standards applicable to this 25 article shall meet all of the following minimum criteria: 26 (1) Be consensus-based, as defined by the Office of 27 Management and Budget, Circular No. A-119, dated February 10, 28 1998. 29 (2) At a minimum, include performance-based categories 30 or tax credits that will foster achievement of items under 20070H1205B1747 - 5 -
1 section 1902-B(2), (3), (4), (6), (7), (8), (9) and (10). 2 (3) Require documentation, verifiable calculations or 3 the equivalent procedure to substantiate and support any 4 claims made under this article. 5 (4) Employ third-party, postconstruction review and 6 verification for achievement of certification. 7 (5) Have a track record of certified green buildings in 8 the United States. 9 (6) Comply with LEED.--NC guidelines for green building 10 certification. 11 Section 1905-B. Eligibility. 12 (a) Projects.--All projects shall meet or exceed a 13 prescribed level of achievement under the adopted high- 14 performance building standard as set forth in section 1904-B. 15 (b) Level of achievement.--The level of achievement to be 16 met under subsection (a) shall be the tier levels. 17 Section 1906-B. High-Performance Building Tax Credit. 18 (a) Eligible taxpayers and buildings.--The High-Performance 19 Building Tax Credit shall be available to a taxpayer, whether 20 owner or tenant, for either the construction of a high- 21 performance building or the rehabilitation of a building which 22 is not a high-performance building into a high-performance 23 building. 24 (b) Application.--A taxpayer may apply for a tax credit 25 against any tax imposed under Article III, IV, VI, VII, VIII, IX 26 or XV. The amount of the credit shall be as specified in section 27 1907-B. The amount of each credit shall not exceed the limit set 28 forth in the initial credit certificate obtained pursuant to 29 section 1908-B(a). In the determination of the tax credit, no 30 cost paid or incurred by the taxpayer shall be the basis for 20070H1205B1747 - 6 -
1 more than one tax credit. 2 (c) Requirements.--The tax credit may not be allowed for any 3 taxable year unless all of the following are met: 4 (1) The taxpayer has obtained and filed both an initial 5 credit certificate and high-performance documentation issued 6 pursuant to section 1908-B. 7 (2) A certificate of occupancy for the building has been 8 issued. 9 (3) The property for which the credit is claimed is in 10 service during the taxable year. 11 (d) Timing.--The credit amount allowed for the high- 12 performance building shall be claimed for the credit allowance 13 year and for each of the three taxable years succeeding the 14 credit allowance year. The total tax credit allowed in the 15 aggregate may not exceed the maximum set forth in the initial 16 tax credit certificate issued under section 1908-B(a). 17 (e) Credit to successor owner.--If a credit is allowed to a 18 building owner pursuant to this article with respect to property 19 and the property, or an interest therein, is sold, the tax 20 credit for the period after the sale which would have been 21 allowable to the prior owner had the property not been sold 22 shall be allowable to the new owner. The tax credit for the year 23 of sale shall be allocated between the parties on the basis of 24 the number of days during such year that the property or 25 interest was held by each. 26 (f) Credit to successor tenant.--If a tax credit is allowed 27 to a tenant pursuant to this article with respect to property 28 and if the tenancy is terminated but the property continues to 29 be used in the building by a successor tenant, the tax credit 30 for the period after termination which would have been allowable 20070H1205B1747 - 7 -
1 to the prior tenant had the tenancy not been terminated shall be 2 allowable to the successor tenant. The tax credit for the year 3 of termination shall be allocated between the parties on the 4 basis of the number of days during such year that the property 5 was used by each. 6 Section 1907-B. Tax credit amount. 7 (a) General rule.--The total tax credit that is available to 8 a taxpayer for a single eligible project shall be distributed in 9 four equal amounts over each of the four years specified in 10 section 1906-B(d). This total amount shall be based on the 11 number of gross square feet of floor space in the eligible 12 building, that building's achievement of an appropriate standard 13 and the tier of achievement earned. In addition, no building may 14 receive a tax credit unless it has earned achievement at or 15 above the Tier I level. All such approved projects shall receive 16 a base tax credit of $35,000. 17 (b) Additional tax credit.--An additional tax credit shall 18 be given cumulatively based on the following formula: 19 (1) For buildings achieving Tier I: 20 (i) For the first 10,000 gross square feet, $1.50 of 21 tax credit per square foot. 22 (ii) For up to the next 40,000 gross square feet, an 23 additional $.75 of tax credit per square foot. 24 (iii) For the next 50,000 gross square feet or 25 greater, an additional $.50 of tax credit per square 26 foot. 27 (2) For achieving Tier II: 28 (i) For the first 10,000 gross square feet, $2.50 of 29 tax credit per square foot. 30 (ii) For up to the next 40,000 gross square feet, an 20070H1205B1747 - 8 -
1 additional $1 of tax credit per square foot. 2 (iii) For the next 50,000 gross square feet or 3 greater, an additional $.75 of tax credit per square 4 foot. 5 (3) For achieving Tier III: 6 (i) For the first 10,000 gross square feet, $3.50 of 7 tax credit per square foot. 8 (ii) For the next 40,000 gross square feet, an 9 additional $1.50 of tax credit per square foot. 10 (iii) For the next 50,000 gross square feet or 11 greater, an additional $1.25 of tax credit per square 12 foot. 13 Section 1908-B. Certifications. 14 (a) Initial tax credit certificate.-- 15 (1) The department shall issue an initial tax credit 16 certificate to a taxpayer that has applied for one where the 17 taxpayer has made a showing that the taxpayer will place in 18 service within a reasonable period of time a property which 19 would warrant the allowance of a tax credit under this 20 article. 21 (2) The initial tax credit certificate shall state the 22 first taxable year for which the tax credit may be claimed 23 and its expiration date and shall apply only to property 24 placed in service by the expiration date. The expiration date 25 may be extended at the discretion of the department in order 26 to avoid unwarranted hardship. 27 (3) The initial tax credit certificate shall state the 28 maximum amount of the total tax credit allowable. This total 29 tax credit shall be distributed in four equal amounts over 30 the four taxable years for which the tax credit is allowed 20070H1205B1747 - 9 -
1 under section 1906-B. Initial credit certificates shall not 2 be issued, in the aggregate, for more than $32,000,000 of tax 3 credits. In addition, the certificates shall be limited in 4 their applicability, as follows: 5 Total credits shall not With respect to taxable 6 be allowed for more than: years beginning in: 7 $4,000,000 2007 8 $6,000,000 2008 9 $8,000,000 2009 10 $6,000,000 2010 11 $4,000,000 2011 12 $2,000,000 2012 13 (b) Program extension.--If in the aggregate the total amount 14 of tax credits to be issued is not exceeded, the department may 15 extend the program beyond the initial schedule listed in 16 subsection (a) and shall publish the extension as a notice in 17 the Pennsylvania Bulletin. 18 (c) High-performance documentation.--For each taxable year 19 subsequent to the first year for which a taxpayer claims a tax 20 credit, the taxpayer shall provide annual performance 21 documentation to the department and the Department of 22 Environmental Protection resulting from the following required 23 activities: development and implementation of a Measurement and 24 Verification Plan consistent with Option D: Calibrated 25 Simulation (Savings Estimation Method 2), or Option B: Energy 26 Conservation Measure Isolation, as specified in the 27 International Performance Measurement and Verification Protocol 28 Volume III: Concepts and Options for Determining Energy Savings 29 in New Construction, April 2003. This high-performance 30 documentation shall set forth the specific findings upon which 20070H1205B1747 - 10 -
1 the certificate is based. 2 (d) Filing.--The taxpayer shall file the high-performance 3 documentation and the associated initial tax credit certificate 4 with the application for the tax credit. 5 (e) Information.--The high-performance documentation shall 6 include sufficient information to identify each building and 7 such other information as the Department of Environmental 8 Protection may require. Except for the first year for which the 9 tax credit is sought, such information shall include: 10 (1) Annual energy consumption for the building in terms 11 of British Thermal Units per square foot per year as well as 12 costs per square foot per year for energy consumption by fuel 13 type, performed in accordance with the standards set forth in 14 sections 1904-B and 1905-B. 15 (2) Annual results of indoor air monitoring, if any, 16 performed in accordance with the standards set forth in 17 sections 1904-B and 1905-B. 18 (3) Confirmation that the building continues to meet 19 requirements regarding smoking areas, if provided, in 20 accordance with the standards specified in sections 1904-B 21 and 1905-B. 22 Section 1909-B. Regulations. 23 The department, in consultation with the Department of 24 Environmental Protection, shall promulgate such regulations as 25 may be necessary for the implementation and administration of 26 this article. The regulations shall include, but not be limited 27 to: 28 (1) The adoption of high-performance building standards 29 selected by the department from among accepted industry 30 standards meeting the criteria prescribed in section 1906-B. 20070H1205B1747 - 11 -
1 (2) Procedures and methods for verifying compliance with 2 the adopted standards in the design and construction of 3 eligible building projects under this article. 4 These regulations will be promulgated in accordance with the act 5 of June 25, 1982 (P.L.633, No.181), known as the Regulatory 6 Review Act and section 1920-A of the act of April 9, 1929 7 (P.L.177, No.175), known as The Administrative Code of 1929. 8 Section 1910-B. Report. 9 The department shall annually make a report to the 10 Environmental Resources and Energy Committee of the Senate and 11 the Environmental Resources and Energy Committee of the House of 12 Representatives on the activities undertaken pursuant to this 13 article, including, but not limited to: 14 (1) The total amount of tax credits provided. 15 (2) The amount of tax credits provided by building type. 16 (3) The levels of high-performance building 17 certifications achieved. 18 (4) A description of any changes made to the levels of 19 approved levels of achievement. 20 (5) Other information necessary to provide a complete 21 understanding of the operation of and benefits from this 22 article. 23 Section 2. This act shall take effect as follows: 24 (1) The addition of sections 1901-B, 1902-B, 1903-B, 25 1904-B and 1910-B of the act shall take effect in 30 days. 26 (2) This section shall take effect immediately. 27 (3) The remainder of this act shall take effect in 12 28 months. B28L72BIL/20070H1205B1747 - 12 -