SIPs Tax Credits & Environmental Points

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While energy costs continue to rise and green building practices become more attainable, Structural Insulated Panels are the best choice to incorporate into your next construction project. The United States Energy Policy Act was signed in 2005 giving financial incentives to residential contractors and commercial building owners that build energy efficient homes and buildings; therefore, buying and building with SIPs qualify for many tax rebates and incentives, Energy Efficient Mortgages for homeowners and environmental points towards certifications. The following information and sites help offer an understanding of the Federal & Regional tax incentives, a look into Energy Efficient Mortgages for homeowner and how environmental points work. (Note: This information is for general use and tax credit amounts may vary. Please consult a tax professional to review your specific situation.)


WHAT DO I QUALIFY FOR AS A FIRST TIME HOMEOWNER? The 'First-Time Home Buyer Tax Credit' has been extended through December 31, 2010. This tax credit of up to $8,000 is available for qualified first-time home buyers purchasing a principal residence on or after January 1, 2009 and before December 31, 2010. For more information on the First-Time HOme Buyer Tax Credit, visit the federal housing website. For more information on Energy Star qualified tax credits, visit the consumer/homeowner energy star website.

WHERE CAN I FIND MORE INFORMATION ON CREDITS AND INCENTIVES? 1). Database of State Incentives for Renewable's & Efficiency (DSIRE) is a comprehensive source of information on state, local, utility, and federal incentives and policies that promote renewable energy and energy efficiency. Visit the DSIRE website and click on your state for more local inventive information. 2). Tax Incentives Assistance Project (TIAP) is designed to give consumers and businesses information they need to make use of the federal income tax incentives for energy efficient products and technologies passed by Congress as part of the Energy Policy Act of 2005 and amended several times. Visit TIAP website for more information and links that are available for you.

WHAT DO I QUALIFY FOR AS A HOMEBULIDER? Homebuilders are eligible for a $2000 tax credit for a new energy efficient home achieves fifty percent energy savings for heating and cooling over the 2003 International Energy Conservation Code (IECC) plus 2004 supplements. At least one fifth of the energy savings must come from building envelope improvement, achieved through higher levels of insulation and air sealing. A SIP building envelope delivers high R-value insulation while reducing air leakage, making SIPs an ideal option for meeting this requirement. Click here for more on information on tax credits for Homebuilders from the Energy Star website.

WHAT DO I QUALIFY FOR AS A COMMERCIAL BUILDING OWNER? A tax deduction of up to $1.80 per square foot is available to owners (or designers, in the case of government-owned buildings) of new or existing commercial buildings. To qualify, owners must demonstrate that the building was constructed or reconstructed to save at least 50% of the heating, cooling, water heating, and interior lighting energy cost that meet ASHRAE Standard 90.1-2001. Click here for more information on tax credits for Commercial Buildings from the Energy Star website.

**Tax credits, as compared to tax deductions, directly reduce the amount of income tax owed. Tax deductions reduce the amount of income subject to tax.

HOW DO I QUALIFY & APPLY FOR A HOME TAX CREDIT? To receive the $2000 tax credit for homes, the builder must follow the guidelines set out in IRS Notice 2007-27. To do so, the home applying home must undergo an inspection from an energy rater certified through the Residential Energy Services Network (RESNET). To find a RESNET energy rater in your local area, visit the RESNET website. To assist in the application process, The Internal Revenue Service has created IRS Form 8908 for guidance.

HOW DO I QUALIFY & APPLY FOR A COMMERCIAL TAX DEDUCTION? Owners of commercial buildings must follow the procedures listed in IRS Notice 20006-52. This notification provides guidance for full and partial deductions on new commercial construction and renovation. Since the financial incentive is a tax deduction, the Internal Revenue Service will continue to use standard forms to apply it to your taxes each year. Please consult a tax professional to learn how you can maximize your deduction.

CAN I RECIEVE A PARTIAL TAX DEDUCTION? the case of a building that does not meet the whole building requirement of a 50 percent energy savings, a partial deduction is allowed for each separate building system that is certified by a qualified professional as meeting or exceeding the applicable system savings targets of the $1.80 per square foot commercial tax credits. The applicable system savings targets are those that would result in a total annual energy savings of fifty percent for the whole building, if each of the separate systems met the system target; note that the maximum allowable deduction is $0.60 per square foot. The separate building systems are: Interior Lighting System; Heating, Cooling, Ventilation, and Hot Water System;, and Building Envelope. For more information on partial deductions, visit IRS Notice 2006-52


WHAT IS A ENERGY EFFICIENT MORTGAGE (EEM)? Homeowners purchasing homes built with structural insulated panels (SIPs) may qualify for an Energy Efficient Mortgage (EEM). These special mortgages allow debt to income ratios to be stretched when purchasing an energy efficient home.Next to the mortgage payment, utility bills are one of the largest costs of owning a home, and as energy prices continue to
rise utility costs will become more burdensome to homeowners. A high performance SIP home can save so much money in
heating and cooling bills that lenders are willing to give energy efficient homeowners a larger loan.

HOW DO ENERGY EFFICIENT MORTGAGES WORK? Even with a high monthly mortgage payment, an energy efficient SIP home will save you money every month. Lenders are willing to "stretch" debt to income qualifying ratios up to 2% for homeowners purchasing energy efficient homes, meaning homeowners can borrow more ont he same amount of income.

HOW DO I QUALIFY & APPLY FOR A ENERGY EFFICIENT MORTGAGE? To qualify for an Energy Efficient Mortgage, the home being purchased must be tested for projected energy usage. The measurement of the amount of energy a home uses is called the Home Energy Rating system Index, or HERS index. A HERS index is also used to determine whether a home meets ENERGY STAR standards or qualifies for tax credits under the Energy Policy act of 2005, however, homes do not have to qualify for these programs to be eligible for Energy Efficient Mortgages.

HOW MUCH DOES A HERS RATING COST? Costs are between $400 and $600. The cost of the rating could be paid for by the builder, lender, or real estate agent. Sometimes the cost of a HERS rating can be financed as part of the mortgage. The fee for a HERS rating is small compared to the amount of money an energy efficient home will save in utility costs.

WHERE CAN I FIND MORE ABOUT ENERGY EFFICIENT MORTGAGES? Energy Efficient Mortgages are federally recognized and available through most lenders, including Fannie Mae and Freddie Mac. The Federal Housing Administration offers EEM's, as well as the Department of Veteran's Affairs, and recently the USDA's Rural Development program. To find out more on Energy Efficient Mortgages visit the FHA's website.


PBS SIPS & LEED FOR HOMES: LEED for Homes provides defined goals and processes for all team members to evaluate potential design challenges and offer solutions. This approach ensures the interoperability of systems in a high-performance home. Accountability forms are used to verify the participation of team members in the design process.

Once the home design is complete, the LEED for Homes Provider or Green Rater will conduct an estimate of how the home will score on the rating system. Four levels of certification are offered depending on the amount of points earned: Certified, Silver, Gold, and Platinum. Based on the preliminary evaluation, the builder may wish to include additional green technologies to meet the desired goal.



HOW DOES THE LEED INSPECTION PROCESS WORK? The Green Rater conducts two onsite inspections of the home, one during construction, usually just prior to drywall installation, and another when the home is completed. During the final inspection, the Green Rater conducts the required blower door test, duct leakage test, and other performance tests. The rater is also responsible for verifying that all the green measures in the preliminary evaluation have been successfully installed in the home.

The final step in the certification process is submitting the appropriate paperwork to the LEED for Home Provider who will review the documentation and certify the project. The builder receives a certificate from the USGBC and the home can be marketed as LEED for Homes certified.

PBS SIPS & LEED FOR NEW CONSTRUCTION & MAJOR RENOVATION: The Leadership for Energy and Environmental Design (LEED) for New Construction is the flagship of the LEED body of rating systems administered by the U.S. Green Building Council (USGBC). LEED for New Construction provides guidelines for the design and construction of high-performance commercial. institutional and high-rise residential buildings.

Initiative that require or provide incentives for LEED certification have been adopted by 166 localities and 31 state governments as of November 2008. With many school districts and higher educational institutions jumping on the LEED bandwagon as well, the LEED for New Construction rating system is a driving force in the green building movement.

HOW DOES LEED WORK? Projects certified under the rating system must meet a total points minimum by accumulating points in the following categories: Sustainable Sites, Water Efficiency, Energy and Atmosphere, Materials and Resources, and Innovation and Design Process. Building must also meet prerequisites in each category. Four levels of certification are available, based on the total number of points awarded: Certified, Silver, Gold, and Platinum.

Certified: 40-49 points ~ Silver 50-59 points ~ Gold: 60-79 points ~ Platinum: 80 points & above


HOW DOES THE APPLICATION PROCESS WORK? To apply for LEED for New Construction certification, the project must first be registered on the USGBC website. All documentation is submitted online using the LEED- Online tool. Once the project is registered, the project team identifies operational improvements and equipment upgrades that will earn points under the rating system. These improvements are submitted along with supplementary materials to verify their implementation, including building performance data to demonstrate energy efficiency. The USGBC's evaluation of LEED for New Construction submittals typically takes place in two phases. A design review that analyzes design related credits is followed by a commissioning of the building once it is substantially completed. For building sunder 50,000 sq. ft., certification costs $1,750 for USGBC members. Larger builders are charged on a per square foot basis.

WHY CERTIFY? While LEED Rating Systems can be useful just as tools for building professionals, there are many reasons why LEED project certification can be an asset:

  • Be recognized for your commitment to environmental issues in your community, your organization (including stockholders), and your industry;
  • Receive third party validation of achievement;
  • Qualify for a growing array of state & local government initiatives (including tax credits);
  • Receive marketing exposure through USGBC Web site, GreenBuild conference, case studies, and media announcements

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