What Happened?
Builders in Frederick, Maryland, that meet Leadership in Energy and Environmental Design (LEED) standards are eligible for new property tax credits. The breaks could be applied to existing and new buildings, and cut property taxes for developers by up to 75 percent.
The Goal
How much of a tax credit each developer will receive for meeting LEED or other green standards depends on the certification level the project achieves. The U.S. Green Building Council established four levels of certification, and Frederick matched the levels with increasing levels of tax credits:
- Certified: 25 percent
- Silver: 50 percent
- Gold: 50 percent
- Platinum: 75 percent
The cut in property taxes are designed to encourage developers to implement green building standards on new projects and renovations.
The tax credits will not completely offset the cost of meeting LEED standards, but will aid in reducing expenses. To achieve LEED certification, developers typically spend an additional 5 percent on the project.
Aside from being more environmentally responsible, buildings that meet LEED standards have proven to be more durable and sustainable than less green construction. There is also an increasing demand from buyers for green buildings and features, the Frederick New-Post reported.
Becoming LEED-Certified
According to the U.S. Green Building Council, becoming LEED certified, builders must elect to use environmentally conscious materials and install energy-efficient systems throughout the structures. LEED certifications apply to a number of project types including:
- Building design and construction
- Interior design and construction
- Building operations and maintenance
- Neighborhood development
- Homes
Each project is analyzed to determine how many credits it has earned for each green innovation implemented. The number of points the project earns will determine which level of LEED certification has been achieved:
- Certified: 40-49 points
- Silver: 50-59 points
- Gold: 60-79 points
- Platinum: 80+ points
Federal Tax Credits for Going Green
EnergyStar outlined a number of construction projects that qualify for federal tax credits. Municipalities interested in adding some of these energy-efficient structures or revamping existing buildings in the community should apply for the tax credits:
- Biomass stoves
- Heating, ventilating, air conditioning
- Insulation
- Roofs
- Water heaters
- Windows and doors
- Geothermal heat pumps
- Small wind turbines
- Solar energy systems
- Fuel cells
The federal tax credits available range from covering 10 percent of the cost up to $500 to accounting for 30 percent of the cost with no upper limit. The federal tax credits are available when new projects and retrofits demonstrate a specific level of energy use reduction in the short and long term.
Homeowners Too
The U.S. Department of Energy also offers tax credits to individuals that build a new home or revamp an existing home with energy efficient technology, materials and features. The two main tax credits available include:
- Residential Renewable Energy Tax Credit: applies to solar-electric systems, solar water heating systems, fuel cells, small wind-energy systems and geothermal heat pumps
- Residential Energy Efficiency Tax Credit: applies to water heating, windows, doors and skylights, home weatherization, home sealing, heating and cooling
There are also a variety of state tax credits available to city and residential building projects.
Motivating with Less Taxes
Gov1 has reported on a variety of tax credits used to boost economic activity and environmentally-conscious growth.