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Trends & Developments - Feb 2011 - Benchmarking Requirement Deadline Looms

In late 2009, New York City passed a group of laws in an effort to significantly reduce energy consumption by 2030. One of these laws, the Energy Benchmarking Requirement, mandates annual energy and water benchmark reports for buildings exceeding a certain size. More than one year has elapsed since the enactment of this law and the first report under this legislation is due by May 1, 2011.

OVERVIEW OF LAW 

The Benchmarking law requires annual energy and water benchmark reports for privately owned buildings, both residential and commercial, exceeding 50,000 square feet in size. Benchmarking provides the opportunity to evaluate a building's energy efficiency and assists buyers and sellers in assessing a building's value. Owners of such buildings must submit the first energy report by May 1, 2011, and subsequent annual reports must be submitted no later than May 1 each year. By contrast, water use benchmarking is required only if the Department of Environmental Protection automatic meter reading equipment has been in place for the entire previous calendar year.

Notably, in buildings with separately metered commercial tenants, owners must request the commercial tenant to provide information pertaining to the tenant's separately metered energy use for the previous year and the law mandates that the tenant provide this information. Applicable owners are required to request the information from commercial tenants between January 1 and January 31 of the reporting year, and tenants must provide the information to the owner by February 15.

Utility companies may be utilized to directly upload utility bill data, while water usage data will be directly uploaded by the Department of Environmental Protection.

It is unlawful for the owner of an applicable building to fail to benchmark the building and the owner must preserve records used to benchmark a building for three years and provide them upon request by the Department of Buildings.

TAX INCENTIVES TO REDUCE ENERGY CONSUMPTION 

New York building owners should also note the following incentives to reduce energy consumption on their properties:

Refundable Clean Heating Fuel Tax Credit. a New York State corporate tax credit geared toward the residential sector providing $0.01/gallon for use of biodiesel.

Solar, Wind & Biomass Energy Systems Exemption. a New York State property tax incentive providing a 15-
year real property tax exemption for solar, wind and farm-waste energy systems constructed in New York State, to help ensure that installation of such systems does not result in additional real property taxes.

Energy-Efficient Commercial Buildings Tax Deduction. a federal corporate deduction of $.30-$1.80/sf, available to owners of new or existing buildings who install (1) interior lighting, (2) building envelope, or (3) heating, cooling, ventilation or hot water systems that reduce a building's total energy and power cost by 50% or more in comparison to a building meeting minimum requirements set by American Society of Heating, Refrigerating, and Air-Conditioning Engineers (ASHRAE) Standard 90.1-2001. Energy savings must be calculated using Internal Revenue Service-approved qualified computer software. A $0.6/sf deduction is available to owners of buildings in which individual lighting, building envelope, or heating and cooling systems meet target levels that would reasonably contribute to an overall building savings of 50% if additional systems were installed.

Business Energy Investment Tax Credit. a federal corporate tax credit equal to 30% of costs for solar, fuel cells and small wind energy equipment, or 10% for geothermal, microturbine and combined heat and power (CHP) energy equipment; and U.S. Department of the Treasury's Renewable Energy Grants: federal grants for commercial, industrial and agricultural sectors up to 30% of property that is part of a qualified facility, qualified fuel cell property, solar property, or qualified small wind property or 10% of certain other property.

The foregoing is not a comprehensive list of federal, state and local incentives and programs associated with energy consumption.  For additional information regarding any of these or other programs in effect, please consult with your EisnerAmper tax advisor. 

A companion article by Kenneth Weissenberg focusing on the landmark New York City laws passed in 2009 can be found on the EisnerAmper Real Estate blog or in the Journal of Multistate Taxation and Incentives, Vol. 20, No. 8, November/December 2010.

Trends & Developments – February 2011 

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