Connecticut is readying to award tax credits for “green” buildings, with the application requiring a $10,000 nonrefundable fee, and the state reserving the right not to award a tax credit if “in the best interest of the state.”
Developers are eligible for the credit whose commercial properties meet the U.S. Green Building Council”™s Leadership in Environmental and Energy Design (LEED) gold standard. Administering the program are the Connecticut Office of Policy and Management (OPM) and the Department of Energy and Environmental Protection (DEEP).
Only a handful of Fairfield County commercial buildings have won LEED gold status to date, although dozens more are seeking LEED certification under varying programs.
New York became the first state in the country to enact a tax credit program for green buildings, in 2000, with Maryland and Oregon also offering incentives.
Under a new law this past June, Connecticut authorized up to $25 million for the Green Buildings Tax Credit Program, with no cap on any individual tax credit, but the program setting a statutory limit of $250 per square foot for new construction or $150 per square foot for renovation work. Companies can only take tax credits on additional costs needed to push a building into LEED gold territory.
For new construction, the tax credits amount to 8 percent of applicable expenses, and 10.5 percent of expenses if the project qualifies for the U.S. Green Building Council”™s “platinum” LEED designation. For commercial interior projects that hit LEED gold or platinum, landlords can take tax credits on 5 percent or 7 percent respectively of the costs of meeting the specification.
Connecticut is allowing project managers to take an extra half-percentage point if the project qualifies as a mixed-use development combining commercial and residential elements, is located on a brownfield site or in an enterprise zone, or is within walking distance of a mass transportation station.
Allowable expenses that can be applied toward the credit include:
Ӣ construction or rehabilitation costs;
Ӣ commissioning costs;
Ӣ architectural and engineering fees;
Ӣ site preparation costs such as scaffolding, demolition, fencing and even security; and
Ӣ materials costs, such as carpeting, partitions, lighting, plumbing and HVAC.
Not allowed are the costs of purchasing land and environmental remediation work.
Tax credits can also be sold to third parties, a strategy that has been used by film companies to raise upfront cash for projects in Connecticut. The new tax credit applies to projects that have a certificate of occupancy in hand; the state has not indicated on what grounds it might choose not to award a tax credit after a developer has submitted the $10,000 fee.
OPM has the final say on the initial year any tax credit can be claimed and the length of time for which the credit will be valid.
Connecticut separately is attempting a “green bank” via the new Clean Energy Finance and Investment Authority, which hopes to create self-sustaining funding streams to support programs like the new green building tax credit that promote clean energy and efficiency projects.
