President Obama released his FY 2013 federal budget proposal to Congress on February 13, 2012, which is anticipated to reduce the overall economic deficit and contribute to the long-term growth of the economy.
Within the framework of the proposal, Obama is suggesting a modification to the existing energy efficient commercial building deduction (Section 179D of the IRS Code) by transforming the current tax deduction into a much more valuable tax credit in 2013. Changing the current tax deduction to a tax credit would further encourage energy efficient improvements in commercial buildings and help towards Obama’s goal of a 20 percent reduction in energy consumption for commercial buildings over 10 years.
The proposal states that “the credit with respect to a building would be limited to $0.60 per square foot in the case of energy efficient commercial building property designed to reduce the total annual energy and power costs by at least 20 percent but less than 30 percent, to $0.90 per square foot for qualifying property designed to reduce the total annual energy and power costs by at least 30 percent but less than 50 percent, and to $5 per square foot for qualifying property designed to reduce the total annual energy and power costs by 50 percent or more.”
Additionally, the proposal calls for additional special rules that would allow a real estate investment trust (REIT) to benefit from the new Section 179D tax incentives. Other tax incentives in the 2013 budget that are geared towards reducing energy consumption include modifying existing tax credits for qualified energy property into “refundable” tax credits and providing additional tax credits for eligible property used in an advanced energy manufacturing project.
The response to these modifications is very positive. The mayor of New York in a press release stated, “President Obama's energy efficiency agenda is ambitious, his plan will spur improvements that pay for themselves through lower utility bills and help clean the environment, I look forward to working with him on it.”
The US Green Building Council also applauds Obama’s plan in a press release entitled “President Obama’s Green Building Initiative will Create Jobs, Save Energy and Save Money”