Sustainable Building: Federal Incentives and Regulations

Green building represents one of the most significant cultural and economic forces of the decade.

Changing rules and regulations, as well as the evolution of green building incentive programs, will have a significant impact on the construction industry.

Federal Incentive Programs for Green Building

The government’s most far-reaching effort to encourage green building has been the establishment of various monetary incentive programs. Many of the following programs exist at the federal, state and/or local government levels:

Tax Deductions – A tax deduction reduces one’s taxable income and will reduce the amount of tax paid in accordance with the tax rate.
Tax Credits – A tax credit is directly subtracted from the amount of tax owed, regardless of the tax rate.
Grant Money – A grant represents an award of direct financial assistance.
Loan Programs – An assortment of federal and state loan programs are available.

Much of the money available is intended for homeowners and building owners or managers. However, developers and builders can also benefit from these incentives. Contractors and other design professionals are directly eligible for tax benefits only through government-owned properties, wherein a tax deduction can be transferred from the owner to the designer (a category which includes an architect, engineer, contractor or even an energy consultant).

The Energy Policy Act of 2005 allows this tax deduction to be transferred to designers if the property is government-owned because that property is already tax exempt. Provisions from this act were extended by the Emergency Economic Stabilization Act of 2008 and will be effective through December 31, 2013.

The deduction is worth anywhere from $0.60 to $1.80 per square foot depending on the percentage of heating and cooling energy saved over traditional HVAC designs. Applicants must perform energy modeling calculations that demonstrate the energy and power cost savings to claim the deduction. Department of Energy (DOE) software is available to assist in this effort. Retrofitting existing buildings also qualifies for this deduction.

Winning the Bid

According to a report from McGraw-Hill Construction, green building grew from $42 billion in 2008 to an estimated $55 to $71 billion in 2010. Construction firms that become well-versed in these new technologies will have a competitive advantage in this growing market.

Most of the government’s green building efforts are managed by the DOE’s Office of Energy Efficiency and Renewable Energy (EERE). This department is focused on energy efficiency and encourages the development of renewable energy technologies. This focus creates a heavy emphasis on research and development investments as opposed to actual built installations. However, commercial building owners are eligible for investment tax credits equal to a percentage of expenditures for the use of the following:

• Solar energy
• Fuel cell technology
• Small wind turbines
• Microturbines
• Combined heat and power systems
• Geothermal heat pumps

EERE has also partnered with industry groups as well as state and local governments to establish the Building Technologies Program (BTP). This program strives to promote technologies and create design approaches that will result in net-zero-energy commercial buildings by 2025. Examples of BTP initiatives include:

Developing energy codes and equipment standards.
Working directly with manufacturers, builders and end users, who provide feedback in the development of more energy-efficient building systems.
Providing software for modeling building energy use, calculating federal tax incentives and determining a project’s energy code compliance.

Federal Requirements

The passage of the Energy Independence and Security Act of 2007 set specific goals for federal building projects, including the ambitious goal of making all federal buildings carbon neutral by 2030. In October 2009, President Obama signed Executive Order (E.O.) 13514, “Federal Leadership in Environmental, Energy and Economic Performance,” which reinforces these goals.

All building contractors involved in federal projects will need to work within these new guidelines, which include:

• Improving water efficiency 26 percent by 2020 – In addition to purchasing water-efficient products and services, there are many situations in which federal agencies need to hire contractors certified through a WaterSense labeled program, an EPA program designed to encourage water efficiency in the U.S. by using a special label on consumer products.
• Achieving 50 percent recycling and waste diversion by 2015 – Contractors hired by the federal government will be partners in tracking and reducing waste.
• Having 95 percent of all applicable contracts meet sustainability requirements –  Contracts for all products and services must be “energy efficient, water efficient, bio-based, environmentally preferable, non-ozone depleting, contain recycled content, or are non-toxic or less-toxic alternatives,” according to a U.S. DOE summary.
• Implementing the 2030 net-zero-energy building requirement – This will apply to all new federal buildings entering the design phase in 2020 or later.
• Implementing stormwater provisions of the Energy Independence and Security Act of 2007 – These provisions are more stringent than those for non-governmental jobsite stormwater management, and contractors will be responsible for implementing strategies to meet the provisions.

Environmental Regulations

Contractors need to stay abreast of changing federal and state governmental regulations that affect all jobsites. Noncompliance may result in civil or criminal penalties.

Permitting requirements for stormwater runoff have tightened during the past decade with the intent of limiting soil erosion and the contamination of watershed areas.

Most states are authorized to issue permits on behalf of the EPA’s National Pollutant Dis-charge Elimination System (NPDES) program. Generally, a stormwater pollution prevention plan must be developed to outline how pollutants, sediment and erosion will be controlled on the jobsite.

Other requirements address the ways in which construction projects impact air quality. Most of these are state-level laws, but they stem from the Federal Clean Air Act. The major source of airborne construction site pollution is emissions from diesel-powered vehicles and heavy equipment, but demolition and land clearing also creates airborne particulates. Various strategies to limit the dispersal of construction site dust are encouraged, including the use of wind fencing or covers and using water or dust-reducing chemicals. Tracking (spreading construction site dirt to roadways where it dries and becomes airborne) is also regulated in some areas.

In some cases, state and local governments have more stringent requirements than the federal requirements. In such cases, those state and local laws supersede the federal ones.

Online Resources

Sustainable construction rules and regulations are constantly evolving. Stay up-to-date on all information affecting sustainable design, and you will prove to be a valuable resource.

The Database of State Incentives for Renewables and Efficiency (DSIRE): Provides a consolidated, easy-to-reference list of state incentive programs www.dsireusa.org
Building Technologies Program: Maintains an up-to-date list of federal tax incentives that impact the commercial building industry www1.eere.energy.gov/buildings
Grants.gov: Offers a clearinghouse of information on more than 1,000 grant programs offered through 26 federal agencies www.grants.gov
Catalog of Federal Domestic Assistance: Provides detailed program descriptions for more than 2,000 federal assistance programs www.cfda.gov


Kristin Dispenza is the architectural/LEED coordinator for BMG Green, an environmentally focused division of Fort Wayne, Ind.-based BMG. BMG Green helps manufacturers identify, develop, promote and sell their green technologies, equipment and products to the right customers within the construction industry

Construction Business Owner, February 2011