Roundtable-supported legislation that would accelerate depreciation for high performance upgrades in commercial and multifamily buildings – creating jobs and reducing the built environment’s carbon footprint – was reintroduced this week by House Ways and Means Committee members Brad Schneider (D-IL) and Tom Rice (R-SC).
The E-QUIP Approach
- The bipartisan Energy Efficient Qualified Improvement Property (E-QUIP) Act (H.R. 2346), originally introduced last December by Reps. Schneider and Rice, encourages energy efficiency building retrofits to replace aging and obsolete HVAC, lighting, windows, roofs, and windows with state-of-the-art systems.
- The Real Estate Roundtable has rallied a unique coalition of environmental, manufacturing, and business groups to support the bill. The coalition sent an April 1 letter to members of the House Ways and Means Committee, and the Energy and Commerce Committee, to enact the E-QUIP Act and include it in any infrastructure package.
- Roundtable President and CEO Jeffrey DeBoer stated, “The E-QUIP Act checks all of the boxes for smart energy, climate, and economic policy. 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.”
- DeBoer added, “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.”
Support for an Energy Efficient Economy
- The American Council for an Energy-Efficient Economy (ACEEE) has prepared a fact sheet and analysis that estimates the climate, energy, and jobs benefits of E-QUIP Act retrofit projects:
- 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 million cars off the road for one year.
- Key elements of the E-QUIP Act are:
- Elective 10-year, straight-line cost recovery period for a new category of depreciable property that meets the E-QUIP Act’s high-performance standards.
- Available to replace or retrofit systems and components in buildings that are at least 10 years old.
- Certification requirement that E-QUIP is designed, installed, operated, and maintained by credentialed professionals.
- Five-year duration of incentive.
- A uniform 10-year depreciation period for components that meet E-QUIP standards would simplify the current cost recovery “patchwork” in the federal tax code for building investments.
The E-QUIP Act and advocacy efforts to include it as part of infrastructure legislation will be a focus of discussion during The Roundtable’s April 20 (Remote) Spring Meeting.
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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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U.S. Senate Finance Committee Chairman Chuck Grassley (R-IA) and Ranking Member Ron Wyden (D-OR) yesterday announced the formation of several bipartisan taskforces to examine and help permanently resolve the fate of 42 expired and expiring tax provisions. (Senate Finance Committee Announcement, May 16)
U.S. Senate Finance Committee Chairman Chuck Grassley (R-IA), above, and Ranking Member Ron Wyden (D-OR) yesterday announced the formation of several bipartisan taskforces to examine and help permanently resolve the fate of 42 expired and expiring tax provisions. (Senate Finance Committee Announcement and Video of Grassley statement, May 16)
- Among the expired provisions are a deduction for energy efficient commercial buildings (sec. 179D), the new markets tax credit, and the exclusion of income for debt forgiveness on a principal home. The committee members assigned to each task force are detailed in a committee news release.
- In conjunction with the announcement, the Joint Committee on Taxation (JCT) issued a report yesterday on the tax provisions that expired in 2017 and 2018, as well as those set to expire this year. The taskforces are expected to complete their work by the end of June. (Grassley statement, May 16)
- “We’ll ask the taskforces to work with stakeholders, other Senate offices, and interested parties to consider the original purpose of the policy and whether the need for the provision continues today,” said Chairman Grassley. “If so, we’ll ask the taskforce to identify possible solutions that would provide long-term certainty in these areas.” (Video of Grassley statement, May 16)
- Legislation supported by The Roundtable is currently pending to fix a technical error from the Tax Cut and Jobs Act regarding depreciation of interior building improvements, known as Qualified Improvement Property (“QIP”). (Roundtable Weekly, March 15 and QIP Policy Comment Letter, April 26)
- In the House, Ways and Means Committee Chairman Richard Neal (D-MA) has suggesting tax extenders should be part of a more comprehensive tax package. (CQ, March 16)
- This week, a Ways and Means hearing focused on “The Economic and Health Consequences of Climate Change.” In his opening statement, Chairman Neal said, “Climate change is real. The business community understands this, and savvy companies are planning accordingly.” He added, “… it’s time for Congress to get on board. We cannot rely solely on the business community to solve this problem for us. The federal government has a significant role to play in creating real pathways for meaningful, long-term economic growth that creates solutions to reduce carbon emissions.” (Chairman Neal’s Opening Statement, May 15)
- The Real Estate Roundtable and a broad coalition of real estate and environmental organizations last week urged Senate and House tax writers to establish an accelerated depreciation schedule for a new category of Energy Efficient Qualified Improvement Property installed in buildings – or “E-QUIP.” (Coalition E-QUIP Letter, May 8)
- Roundtable President and CEO Jeffrey DeBoer said, “The purpose of establishing a new E-QUIP category in the tax code is to stimulate productive, capital investment on a national level that modernizes our nation’s building infrastructure while helping to lower greenhouse gas emissions. As Congress considers potential tax, infrastructure, and climate legislation, the E-QUIP proposal should have bipartisan appeal on a range of important policies prioritized by Republicans and Democrats.” (Roundtable Weekly, May 10)
E-QUIP and tax extenders will be among several tax policy issues discussed during The Roundtable’s June 11-12 Annual Meeting in Washington, DC.