PRINTER'S NO. 849
THE GENERAL ASSEMBLY OF PENNSYLVANIA
HOUSE BILL
No.
861
Session of
2021
INTRODUCED BY SIMS, SANCHEZ, HOHENSTEIN, GUENST, HILL-EVANS,
SCHWEYER, SCHLOSSBERG, LEE, KINKEAD, WEBSTER, FREEMAN, BRIGGS
AND MADDEN, MARCH 11, 2021
REFERRED TO COMMITTEE ON FINANCE, MARCH 11, 2021
AN ACT
Amending the act of March 4, 1971 (P.L.6, No.2), entitled "An
act relating to tax reform and State taxation by codifying
and enumerating certain subjects of taxation and imposing
taxes thereon; providing procedures for the payment,
collection, administration and enforcement thereof; providing
for tax credits in certain cases; conferring powers and
imposing duties upon the Department of Revenue, certain
employers, fiduciaries, individuals, persons, corporations
and other entities; prescribing crimes, offenses and
penalties," providing for the High-Performance Buildings Tax
Credit.
The General Assembly of the Commonwealth of Pennsylvania
hereby enacts as follows:
Section 1. The act of March 4, 1971 (P.L.6, No.2), known as
the Tax Reform Code of 1971, is amended by adding an article to
read:
ARTICLE XIX-H
HIGH-PERFORMANCE BUILDINGS TAX CREDIT
Section 1901-H. Scope of article.
This article authorizes the High-Performance Buildings Tax
Credit.
Section 1902-H. Purpose.
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The General Assembly declares the purposes of this article
are as follows:
(1) To promote better energy and environmental standards
for construction, rehabilitation and maintenance of buildings
in this Commonwealth.
(2) To optimize the energy performance of buildings
throughout this Commonwealth.
(3) To increase the demand for environmentally
preferable building materials, finishes and furnishings.
(4) To improve environmental quality in this
Commonwealth by decreasing the discharge of pollutants from
buildings and their manufacture.
(5) To create public awareness of new technologies that
can improve the health and productivity of building occupants
by meeting advanced criteria for indoor air quality.
(6) To improve working conditions and reduce related
health problems.
(7) To reduce this Commonwealth's dependence on imported
sources of energy through buildings that conserve energy and
utilize local and renewable energy sources.
(8) To protect and restore this Commonwealth's natural
resources by avoiding development of inappropriate building
sites.
(9) To reduce the burden on municipal water supply and
treatment by reducing potable water consumption.
(10) To reduce waste generation and to manage waste
through recycling and diversion from landfill disposal.
(11) To improve this Commonwealth's capacity to design,
build and operate higher-performance buildings and, in doing
so, to create new jobs and contribute to economic growth.
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Section 1903-H. Definitions.
The following words and phrases when used in this article
shall have the meanings given to them in this section unless the
context clearly indicates otherwise:
"Achievement." Achievement and award of certification by a
high-performance green building standard as provided under
section 1904-H and adopted by regulation.
"Building project." The design, construction and renovation
of an inhabited physical structure and project building site.
"Commercial interior fit-out." Interior design and
installation by owners or tenants of new or existing space,
excluding structural components and core and shell elements.
"Credit allowance year." The later of:
(1) The taxable year during which the property,
construction, completion or rehabilitation referred to in
section 1906-H(a) has been placed in service or has received
a final certificate of occupancy.
(2) The first taxable year with respect to which the tax
credit may be claimed pursuant to the initial tax credit
component certificate issued under section 1908-H(a).
"Department." The Department of Revenue of the Commonwealth.
"Eligible building." A building located in this Commonwealth
that is any of the following:
(1) A residential multifamily building with at least
four habitable stories that contains at least 10,000 square
feet of interior space.
(2) One or more residential multifamily buildings with
at least four habitable stories that are part of a single or
phased construction project that contains, in the aggregate,
at least 20,000 square feet of interior space, provided that
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in any single phase of a project at least 10,000 square feet
of interior space is under construction or rehabilitation.
(3) A building used for commercial or industrial
purposes of at least 10,000 gross square feet.
(4) Any combination of buildings described in paragraph
(1), (2) or (3) with at least 30,000 square feet of interior
space and a minimum of 10,000 square feet of interior space
per building.
"High-performance building." A building that is designed to
achieve integrated systems design and construction so as to
significantly reduce or eliminate the negative impact of the
built environment.
"LEED." The Leadership in Energy and Environmental Design
Green Building Rating System developed by the U.S. Green
Building Council.
"LEED NC." LEED's rating system for New Construction and
Major Renovations.
"Tax credit." The High-Performance Buildings Tax Credit
authorized under this article.
"Taxpayer." A business entity subject to tax under Article
III, IV, VI, VII, VIII, IX or XV. The term shall include the
shareholder of a Pennsylvania S corporation that receives a tax
credit under this article.
"Tiers." The following:
(1) The level of achievement that must occur to
calculate the eligible amount of tax credit available. During
the first year of implementation of this article, the term
means three levels as follows:
(i) Tier I: Achievement of the minimum level
required for certification plus one additional level.
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Tier I shall also require the achievement of
Environmental Protection Agency Energy Star rating of at
least 85 following the second year of facility operation.
(ii) Tier II: Achievement of the minimum level
required for certification plus two additional levels.
Tier II shall also require achievement of Environmental
Protection Agency Energy Star rating of at least 90
following the second year of facility operation.
(iii) Tier III: Achievement of the minimum level
required for certification plus three additional levels.
Tier III shall also require achievement of Environmental
Protection Agency Energy Star rating of at least 95
following the second year of facility operation.
(2) The three tier levels shall remain in effect unless
and until modifications are made by the department, in
consultation with the Department of Environmental Protection,
and necessitated by the emergence of new or changes to
existing high-performance building standards as defined under
sections 1904-H and 1905-H.
Section 1904-H. Standards.
The high-performance building standards applicable to this
article shall meet all of the following minimum criteria:
(1) Be consensus based, as defined by the Office of
Management and Budget, Circular No. A-119, dated February 10,
1998.
(2) At a minimum, include performance-based categories
or tax credits that will foster achievement of items under
section 1902-H(2), (3), (4), (6), (7), (8), (9) and (10).
(3) Require documentation, verifiable calculations or
the equivalent procedure to substantiate and support any
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claims made under this article.
(4) Employ third-party, postconstruction review and
verification for achievement of certification.
(5) Have a track record of certified green buildings in
the United States.
(6) Comply with LEED NC guidelines for green building
certification.
Section 1905-H. Eligibility.
(a) Projects.--All projects shall meet or exceed a
prescribed level of achievement under the adopted high-
performance building standard as provided under section 1904-H.
(b) Level of achievement.--The level of achievement to be
met under subsection (a) shall be the tier levels.
Section 1906-H. High-Performance Building Tax Credit.
(a) Eligible taxpayers and buildings.--The High-Performance
Building Tax Credit shall be available to a taxpayer, whether
owner or tenant, for either the construction of a high-
performance building or the rehabilitation of a building which
is not a high-performance building into a high-performance
building.
(b) Application.--A taxpayer may apply for a tax credit
against any tax imposed under Article III, IV, VI, VII, VIII, IX
or XV. The amount of the credit shall be as specified in section
1907-H. The amount of each credit shall not exceed the limit
provided in the initial credit certificate obtained under
section 1908-H(a). In the determination of the tax credit, no
cost paid or incurred by the taxpayer shall be the basis for
more than one tax credit.
(c) Requirements.--The tax credit may not be allowed for any
taxable year unless all of the following are met:
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(1) The taxpayer has obtained and filed both an initial
credit certificate and high-performance documentation issued
under section 1908-H(c).
(2) A certificate of occupancy for the building has been
issued.
(3) The property for which the credit is claimed is in
service during the taxable year.
(d) Timing.--The credit amount allowed for the high-
performance building shall be claimed for the credit allowance
year and for each of the three taxable years succeeding the
credit allowance year. The total tax credit allowed in the
aggregate may not exceed the maximum provided in the initial tax
credit certificate issued under section 1908-H(a).
(e) Credit to successor owner.--If a credit is allowed to a
building owner under this article with respect to property and
the property or an interest therein is sold, the tax credit for
the period after the sale which would have been allowable to the
prior owner had the property not been sold shall be allowable to
the new owner. The tax credit for the year of sale shall be
allocated between the parties on the basis of the number of days
during the year that the property or interest was held by each.
(f) Credit to successor tenant.--If a tax credit is allowed
to a tenant under this article with respect to property and if
the tenancy is terminated but the property continues to be used
in the building by a successor tenant, the tax credit for the
period after termination which would have been allowable to the
prior tenant had the tenancy not been terminated shall be
allowable to the successor tenant. The tax credit for the year
of termination shall be allocated between the parties on the
basis of the number of days during the year that the property
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was used by each.
Section 1907-H. Tax credit amount.
(a) General rule.--The total tax credit that is available to
a taxpayer for a single eligible project shall be distributed in
four equal amounts over each of the four years specified in
section 1906-H(d). This total amount shall be based on the
number of gross square feet of floor space in the eligible
building, that building's achievement of an appropriate standard
and the tier of achievement earned. In addition, no building may
receive a tax credit unless it has earned achievement at or
above the Tier I level. All the approved projects shall receive
a base tax credit of $35,000.
(b) Additional tax credit.--An additional tax credit shall
be given cumulatively based on the following formula:
(1) For buildings achieving Tier I:
(i) For the first 10,000 gross square feet, $1.50 of
tax credit per square foot.
(ii) For up to the next 40,000 gross square feet, an
additional $.75 of tax credit per square foot.
(iii) For the next 50,000 gross square feet or
greater, an additional $.50 of tax credit per square
foot.
(2) For achieving Tier II:
(i) For the first 10,000 gross square feet, $2.50 of
tax credit per square foot.
(ii) For up to the next 40,000 gross square feet, an
additional $1 of tax credit per square foot.
(iii) For the next 50,000 gross square feet or
greater, an additional $.75 of tax credit per square
foot.
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(3) For achieving Tier III:
(i) For the first 10,000 gross square feet, $3.50 of
tax credit per square foot.
(ii) For the next 40,000 gross square feet, an
additional $1.50 of tax credit per square foot.
(iii) For the next 50,000 gross square feet or
greater, an additional $1.25 of tax credit per square
foot.
(c) Availability of tax credits.--Each fiscal year,
$10,000,000 in tax credits shall be made available to the
department and may be awarded by the department in accordance
with this article.
Section 1908-H. Certifications.
(a) Initial tax credit certificate.--The following shall
apply:
(1) The department shall issue an initial tax credit
certificate to a taxpayer that has applied for one where the
taxpayer has made a showing that the taxpayer will place in
service within a reasonable period of time a property which
would warrant the allowance of a tax credit under this
article.
(2) The initial tax credit certificate shall state the
first taxable year for which the tax credit may be claimed
and its expiration date and shall apply only to property
placed in service by the expiration date. The expiration date
may be extended at the discretion of the department in order
to avoid unwarranted hardship.
(3) The initial tax credit certificate shall state the
maximum amount of the total tax credit allowable. This total
tax credit shall be distributed in four equal amounts over
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the four taxable years for which the tax credit is allowed
under section 1906-H(d). Initial credit certificates shall
not be issued, in the aggregate, for more than $32,000,000 of
tax credits. In addition, the certificates shall be limited
in their applicability, as follows:
Total credits shall not With respect to taxable
be allowed for more than: years beginning in:
$4,000,000 2020
$8,000,000 2021
$8,000,000 2022
$6,000,000 2023
$4,000,000 2024
$2,000,000 2025
(b) Program extension.--If in the aggregate the total amount
of tax credits to be issued is not exceeded, the department may
extend the program beyond the initial schedule listed in
subsection (a) and shall transmit the extension to the
Legislative Reference Bureau as a notice for publication in the
Pennsylvania Bulletin.
(c) High-performance documentation.--For each taxable year
subsequent to the first year for which a taxpayer claims a tax
credit, the taxpayer shall provide annual performance
documentation to the department and the Department of
Environmental Protection resulting from the following required
activities: development and implementation of a Measurement and
Verification Plan consistent with Option B: ECM Isolation, or
Option D: Whole Building Calibrated Simulation (Savings
Estimation Method 2), as specified in the International
Performance Measurement and Verification Protocol Volume III:
Concepts and Options for Determining Energy Savings in New
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Construction, April 2003. This high-performance documentation
shall provide the specific findings upon which the certificate
is based.
(d) Filing.--The taxpayer shall file the high-performance
documentation and the associated initial tax credit certificate
with the application for the tax credit.
(e) Information.--The high-performance documentation shall
include sufficient information to identify each building and
other information as the Department of Environmental Protection
may require. Except for the first year for which the tax credit
is sought, the information shall include:
(1) Annual energy consumption for the building in terms
of British Thermal Units per square foot per year as well as
costs per square foot per year for energy consumption by fuel
type, performed in accordance with the standards provided
under sections 1904-H and 1905-H.
(2) Annual results of indoor air monitoring, if any,
performed in accordance with the standards provided under
sections 1904-H and 1905-H.
(3) Confirmation that the building continues to meet
requirements regarding smoking areas, if provided, in
accordance with the standards specified in sections 1904-H
and 1905-H.
Section 1909-H. Regulations.
The department, in consultation with the Department of
Environmental Protection, shall promulgate regulations as may be
necessary for the implementation and administration of this
article. The regulations shall include, but not be limited to:
(1) The adoption of high-performance building standards
selected by the department from among accepted industry
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standards meeting the criteria prescribed in section 1906-H.
(2) Procedures and methods for verifying compliance with
the adopted standards in the design and construction of
eligible building projects under this article.
These regulations will be promulgated in accordance with the act
of June 25, 1982 (P.L.633, No.181), known as the Regulatory
Review Act, and section 1920-A of the act of April 9, 1929
(P.L.177, No.175), known as The Administrative Code of 1929.
Section 1910-H. Report.
The department shall annually make a report to the
Environmental Resources and Energy Committee of the Senate and
the Environmental Resources and Energy Committee of the House of
Representatives on the activities undertaken under this article,
including, but not limited to:
(1) The total amount of tax credits provided.
(2) The amount of tax credits provided by building type.
(3) The levels of high-performance building
certifications achieved.
(4) A description of any changes made to the levels of
approved levels of achievement.
(5) Other information necessary to provide a complete
understanding of the operation of and benefits from this
article.
Section 2. This act shall take effect as follows:
(1) The addition of sections 1901-H, 1902-H, 1903-H,
1904-H and 1910-H of the act shall take effect in 30 days.
(2) This section shall take effect immediately.
(3) The remainder of this act shall take effect in 12
months.
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