On Monday, President Obama unveiled his $3.8 trillion budget for next year 2013.  A huge amount of money is proposed for clean energy and infrastructure improvements, to stimulate the economy.

He followed up on his Better Buildings Initiative, which is a 10 year plan to make all non-residential buildings at least 20% more efficent.  As a part of this plan, he proposes to change the existing Commercial Building Tax Deduction in IRC section 179D into a credit in the same amount.  He also proposes to allow other entities to be eligible for this new credit including real estate investment trusts (REITs).  While this should be applauded, the President did propose the same item in his American Jobs Act last year, and unfortunately it didn’t get much support, if any, in Congress.

Just as a reminder, the current deduction in IRC 179D allows a developer a tax deduction up to $1.80 per square foot of any new or major renovation of a commercial building.  It is based on obtaining increased building efficiency from a baseline standard.  There are three components, lighting, HVAC and building envelope, each of which can yield a maximum of $.60 per square foot, and they can be used seperately.  The deduction can be transferred by the developer to an architect or engineer.   The deduction is only available for work on commercial buildings this year of 2012, then it will expire.

Its good to know that other financial incentives are being proposed for sustainable building.  There should be incentives on every level of government, including federal state and local levels. Incentives, which seek voluntary behaviour are preferable to mandates which require it.