New legislation introduced this week by House Ways and Means Committee members Brad Schneider (D-IL) and Tom Rice (R-SC) would accelerate depreciation for high performance upgrades in commercial and multifamily buildings – creating new jobs in the construction, design, and energy sectors; boosting equipment manufacturing; and reducing the built environment’s carbon footprint. (Rep. Schneider news release, Dec. 9)
- The Energy Efficient Qualified Improvement Property (E-QUIP) Act proposes the establishment of an elective 10-year, straight-line cost recovery period for a new category of E-QUIP expenditures that meet strict energy efficiency criteria. The E-QUIP benefit would apply to “above code” heating and cooling equipment; lighting; building shell components (e.g., roofs, insulation, and windows); and “smart controls” (e.g., web-enabled thermostats, occupancy and daylight sensors) – as long as they are installed through 2025.
- Real Estate Roundtable President and CEO Jeffrey D. DeBoer helped to launch support for the E-QUIP Act during a Dec. 8 virtual meeting led by Reps. Schneider and Rice that reached a spectrum of stakeholders representing environmental, manufacturing, and real estate organizations.
- “The E-QUIP Act checks all of the boxes for smart energy, climate, and economic policy,” DeBoer said. “Installation of high performance HVAC, lights, windows, and other building components will modernize aging buildings, save businesses billions of dollars on their energy bills, create tens of thousands of jobs, and avoid carbon emissions equal to taking 22 million cars off the road for a year. The E-QUIP Act can also encourage state-of-the-art retrofits that enhance outdoor air ventilation rates — a key practice to improve a building’s health and indoor air quality, according to the best available science.”
- The Roundtable and numerous other stakeholders wrote to congressional tax writers last year about the need to establish an accelerated depreciation schedule for E-QUIP. (Coalition E-QUIP letter, May 8, 2019)
The American Council for an Energy-Efficient Economy (ACEEE) released research this week estimating the E-QUIP Act’s economic and environmental impacts would include:
- 130,000 net additional job-years
- $15 billion energy bill savings
- 100 million tons of carbon dioxide emissions avoided – or the equivalent emissions from 560,000 rail cars full of coal, or taking 22,000 cars off the road for one year. (ACEEE’s E-QUIP policy brief and fact sheet)
- “Many building owners want to make energy efficiency investments, but existing law disincentivizes them. This fix will help them upgrade from old equipment to state-of-the-art options that will reduce their energy bills while cutting carbon emissions,” said ACEEE Executive Director Steven Nadel in a press release.
- Most investments in existing commercial and multifamily buildings are currently ineligible for the immediate tax deductions available to other business investments under the 2017 Tax Cut and Jobs Act. Instead, they are subject to depreciation periods as long as 40 years, depending on the kind of building, whether the investments affect the interior or exterior, and the tax status of the owner.
- The current patchwork of depreciation periods is largely unrelated to the useful lifetime of the investments. The new E-QUIP proposal would apply uniform criteria to an elective 10-year depreciation period.
- The Roundtable and other supporters aim to undertake a coordinated advocacy effort to identify additional House sponsors for the bill, and support introduction of companion legislation in the Senate.
The E-QUIP Act will be discussed in greater detail at the “virtual” meetings of The Roundtable’s Tax Policy Advisory Committee (TPAC) and Sustainability Policy Advisory Committee (SPAC) on Jan. 27.
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